How do tax write offs work if you are in business for yourself?
Is it true that I can write off any expenses that I use for my business? I recently got my real estate license and they told me not worry about fees and advertising because I can write all of it off at the end of the year and get all of it back in taxes. Is this true or are they lying to me? What if I join a club that requires a monthly membership fee for the sole purpose of meeting new clients? Does that count as a write off?
- 6 months ago
Yes, you can write off business expenses.
You don't "get it back in taxes". You subtract the expenses from your income and thus pay less taxes.
- StephenWeinsteinLv 76 months ago
When you write off something on your taxes, you don't get back all of it. It simply reduces your taxable income. For example, if you make $100,000 and write off $10,000, then you pay the tax that you would have paid if you made $90,000 and wrote off nothing. You're typically getting back 10-40% of the amount you write off, certainly not 100%.
- JudyLv 76 months ago
A writeoff does NOT mean you get the whole amount back. It gets deducted from your income before your tax is calculated so you pay less tax, but it's nowhere near dollar for dollar. The club dues you mention might count as a deduction. If you have $4000 in writeoffs, you might save around $1000 in tax, the other 3000 comes out of your own pocket.
- AmyLv 76 months ago
You pay income tax on the business profit. That means you can subtract legitimate business expenses from revenue before calculating your tax on the difference.
If you're in the 22% tax bracket, that means for each dollar you "write off" you save 22 cents of tax. You do NOT get the whole dollar back.
For the most part, anything used exclusively for business does count. However, be prepared to prove to the IRS that you got no personal benefit/use out of it. A club membership does not sound like it would meet that criterion. (A commonly denied item is a computer for a "home office" that is also used as your personal computer)
Self-employment write-offs are a tempting place for people to cheat on their taxes, so they get audited a lot.
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- AlCaponeLv 76 months ago
You don't "write off" business expenses or get refunds on them-- you *deduct* them from your profits, which means you don't pay tax on that amount. So, let's say you are in a 20% tax category and you spend $100 on an allowable business expense. You save $20 on your taxes.
- Anonymous6 months ago
Without INCOME, you don't get any write offs.
- TavyLv 76 months ago
You do what I did, hire an accountant. For a small fee a year they do the lot.
- Huh?Lv 76 months ago
it is more complicated than that, talk to a tax professional. It depends how you organized your business, whether you are a 1120 filer, and many other factors. You also get to offset income with your expenses, reducing your tax burden, that doesn't mean you will "get the money back on your taxes." If you have a Net Operating loss you might be able to carry losses forward into future years when you might have taxable business income.
This is complicated and DO NOT LISTEN to people on this site, get tax advice from a professional.
- 6 months ago
This is what stupid people claim.
Now you can write off fees and advertising. You don't "get it back in taxes," as that implies you would deduct it from your taxes. However you don't pay taxes on money you spent in this way, because it wasn't "income"
Club memberships are no longer write-offs the way they once were. A lot of things aren't.
I'd suggest you hire someone to do your taxes.
- davidmi711Lv 76 months ago
Profits = income - expenses.
Business expenses reduce taxable profits.
I highly recommend you obtain a copy of the 1040 long form and Schedule C, "Form 1040, Profit and Loss” so you will see how these expenses are reported at the end of the year.