What does it mean exactly when someone writes something off their taxes.?

Question

Like when they save reciepts, does it mean that they pay that same amount less from what they owe at the end of the year. Ex. if I spend $600 on a business trip that qualifies as business expenses, I can then owe $600 less on my taxes?

Answer 1

Writing something off is taking a deduction from your taxable income.

Using your example, if you have total income of $10,000. The $600 for the business trip would reduce your income to $9,400 assuming no other deductions. It would not reduce your taxes $600. This is a basic example.

A tax credit, like the Child Tax Credit or Earned Income Credit will reduce your taxes by that amount. The Child Tax Credit is capped at $1000 per child or your total tax liability, whichever is less. The Earned Income Credit is on a sliding scale and can be refunded even if you have no tax liability.

Answer 2

Writing something off as a deduction means that amount is subtracted from your income before your taxes are calculated. The amount you save in taxes is not the total amount of the deduction, it's a percentage that depends on your tax bracket. In your example, if you are in the 15% tax bracket (the most common) and you have a $600 deduction, you would pay $90 less in taxes.

For most deductions, you have to itemize to get any benefit from them. When you file your tax return, you are allowed a "standard deduction" - for most people, it was $5150 for 2006 - you can deduct this amount from your income without having any receipts or any list of deductible items. If the allowable deductions that you have are larger than your standard deduction amount, then you would list them on your return, and take that total instead of your standard deduction.
So unless your total is more than the standard, you do better just taking the standard and not listing your individual deductions.

If you own your own business, then you don't have to itemize to deduct business expenses from your income. If you are an employee, though, and have business expenses that your employer doesn't reimburse you for, you can only deduct them if you itemize, and even then can only deduct the amount of your unreimbursed business expenses that are over 2% of your adjusted gross income.

There is also something called a credit - these do decrease your taxes dollar for dollar by the amount of the credit. Some common credits are the child tax credit, dependent care tax credit, education credits, and earned income credit.

Answer 3

ie when accrued accounting companies have an account for uncollectible accounts, at their discretion, and according to their accounting plans, some of those uncollectibles are written off, a tax write off this is only an example, there are more a tax deductible item is ie. the mortgage interest you pay on your home, it will allow you to itemize and probably able to deduct a number of other things you would not otherwise in essence it reduces your taxable income, not necessarily a tax deduction a tax deduction would be something to reduce your actual tax liability such as the child tax credit of $1000 for children under 17 in the household

Answer 4

it means that it doesn't count or it is a deduction