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Tax Write-Offs

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Understanding and Using Tax Write Offs

You've almost certainly heard someone in your life say, "That's a tax write off," when they're talking about buying things for their business or giving you financial advice (whether you've asked for it or not). And it's true; write-offs can make a huge difference in the tax you end up paying. But write-offs can be pretty complicated. It takes work to plan and do the accounting to make a write-off pay off. And you have to understand what can be written off and what can't. What people should really be saying is, "How do tax write offs work?"

Table of contents

What is a write off?...Read more

How does a tax write off affect my tax payment?...Read more

What is a tax deduction?...Read more

Write offs vs. the standard deduction...Read more

What is a write off?

When people throw around the words "tax write off," they usually mean an expense you've incurred for your business, which is accurate. Whether you are a small business, independent contractor or freelancer, you have business expenses that you can deduct from the amount of income you earned throughout the tax year. This can then reduce the amount of your income that can be taxed and lower your tax bill. Say you run a landscaping business as a sole proprietor, and you want to have a website to add legitimacy to your brand and so potential customers can more easily find your business. All the expenses of setting up that website and hosting it are deductible from your taxable income. Expenses like this can seriously add up, and write-offs are there to help small businesses and independent contractors handle them without breaking the bank. When it's time to file your tax return, you can subtract the entire cost of building and maintaining your website from your overall taxable income. This could help you stay in a lower tax bracket and end up with a lower overall tax payment.
What is a write off?

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Charitable Contribution

Charitable Contribution

How to save on taxes when donating to a charity or non-profit.

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Itemized Deductions

Itemized Deductions

The most important tax credits self-employed and freelancers.

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Education Tax Credit

Education Tax Credit

All about the tax benefits available to college students and their parents.

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Home Office Deduction

Home Office Deduction

How the home office deduction saves self-employed people and freelancers on their taxes.

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Home Improvement Deduction

Home Improvement Deduction

What qualifies as a home improvement tax deduction and how self-employed or freelance homeowners can benefit most.

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Health Insurance Deduction

Health Insurance Deduction

How to itemize health insurance as a tax deductible for freelancers and self-employed people.

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Child Tax Credit

Child Tax Credit

The benefits of the Child Tax Credit, who qualifies for it and how it works to help offset the costs of raising a child.

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Travel Expense Deduction

Travel Expense Deduction

How to take business trip tax deductions for freelancers and self-employed people.

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Food and Entertainment Deduction

Food and Entertainment Deduction

How to know what counts as food and drink tax write-offs for self-employed people and freelancers.

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Charitable Contribution

Charitable Contribution

How to save on taxes when donating to a charity or non-profit.

Share
Itemized Deductions

Itemized Deductions

The most important tax credits self-employed and freelancers.

Share
Education Tax Credit

Education Tax Credit

All about the tax benefits available to college students and their parents.

Share
Home Office Deduction

Home Office Deduction

How the home office deduction saves self-employed people and freelancers on their taxes.

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How does a tax write off affect my tax payment?

Let's say you started a business baking and selling pastries to local restaurants last year, and you made $20,000 during the tax year. To start the business, you needed to rent a commercial kitchen, purchase supplies and set up a website. The total cost of all of those combined business expenses is $5,000, and all of them can be write-offs. To deduct them from your taxable income, you simply subtract them from your income, in this case, $20,000-$5,000, for a total of $15,000 in taxable income.

Quick tip

Similar to tax write-offs, tax credits can significantly reduce your tax payment. Find out which tax credits you can qualify for.

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What is a tax deduction?

When we're talking about how tax write offs work, it's important to understand what exactly a tax deduction is and how it works. It all starts with the total amount of money you earn throughout the year, also known as your gross income. Gross income is everything from wages or salary to side income as a freelancer to income from rent or interest. In the US, the tax system has different levels, which are the tax brackets mentioned above. As your gross income increases, you might enter a higher tax bracket, which means you'll be paying more in taxes. A deduction is any money you subtract from your gross income when you pay federal income tax. If all your deductions together amount to enough, it can lower your taxable income and move you into a lower tax bracket.

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Write offs vs. the standard deduction

Americans have a choice when it comes to tax deductions. They can either itemize their deductions or take the standard deduction.

Write offs vs. the standard deduction

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What’s FlyFin?

FlyFin is the #1 A.I.-powered tax app for freelancers, gig workers, independent contractors and sole proprietors. For taxpayers who want to save more by itemizing their deductions, FlyFin tracks all their business expenses automatically using A.I. to find every possible tax write off. Then, FlyFin's CPA team files a guaranteed 100% accurate tax return for you – to save you a couple of thousand dollars and a ton of time on your taxes. Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving more money on your taxes than last year, guaranteed.
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