Hey ,
What is a tax write-off?
Tax write-offs are ordinary and necessary business expenses that you can subtract from your business income.
These are slightly different from deductions because with deductions, you may include
certain business activities such as donations to charity as deductions – but these donations may not necessarily be an operational business expense.
Thus, write-offs ought to be an actual business expense or, in layman’s language, the money you spend to run your business.
But you may wonder, why write a whole email about business expenses when they can just be subtracted from income?
Well, it is not as straightforward as how it sounds. The IRS will not just allow you to reduce your profit and pay less on taxes.
They will want you to prove that the expenses were ordinary and necessary.
That process is called audit proofing. This means keeping all information, such as the
paperwork, receipts, and logs, to back up expenses such as office renovations and make-up during office promo video shoots.
Given that many small businesses do many activities for marketing purposes and have meetings in different locations, it is essential to ensure that you can write off all those expenses.
The money you spend on these activities can run into thousands each year, and if your business income is, for example, $50,000, and your expenses run to $12,000, instead of paying tax on the $50K, you can subtract these write-offs and end up paying tax only on $38,000.
This surely helps you save money.
If you want to know how to create and save paperwork to back up all your expenses, talk to me for the replay of my audit-proof
masterclass.
