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What is a "tax write off"?
(lemmy.world)
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this post was submitted on 11 Feb 2024
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A write off is a colloquialism that refers to reducing your effective taxed income. A more realistic example would be, let’s say you make $250k, but you’re self employed and spent $50k on business expenses like a car and office space. Then you can write off that $50k and only pay taxes like you made $200k.
You can only deduct the full purchase of a capital expense such as a car in certain situations. Usually you have to amortize/depreciate the expense over a set amount of time. I'm not sure if you can still claim milage as an expense if you claim the vehicle as an expense.
I think it was just offered as an illustration of the concept, not as tax advice.
My understanding is that amortization is the confusing part of the situation OP is asking about. When you have an asset, the cost of it is deducted from income over the useful life. By declaring that it will never be released, the useful life is reduced to zero, allowing them to take the whole tax deduction at once.
They still would have been better off never spending the money. Since they already have, if they have so little cash that they can't afford their tax bill, it might make sense to throw away future income to stay afloat now.