What Does It Mean When You Write Something Off?

“Writing something off” is a common phrase in personal finance and taxation, referring to actions that can reduce one’s taxable income. Understanding this concept is important for managing financial obligations effectively, as it directly relates to how much tax an individual or business might owe. This process involves utilizing specific provisions within tax law designed to lessen the tax burden.

What Writing Something Off Means

“Writing something off” primarily means reducing your taxable income through a tax deduction. A tax deduction lowers the amount of your income subject to tax, thereby decreasing your overall tax liability. The benefit of a tax deduction depends on your tax bracket; for example, a $1,000 deduction for someone in a 12% tax bracket would reduce their tax bill by $120.

This mechanism differs from a tax credit, which directly reduces the amount of tax owed, dollar for dollar. For instance, a $1,000 tax credit would reduce a $3,000 tax bill to $2,000. Tax credits are generally more impactful than deductions of the same amount because they provide a direct reduction of taxes, while deductions only reduce the income on which taxes are calculated.

Write-Offs for Individuals

Individuals generally have two main approaches to reducing their taxable income: taking the standard deduction or itemizing deductions. The standard deduction is a fixed dollar amount that varies by filing status and is adjusted annually for inflation. Most taxpayers find the standard deduction to be a simpler and often more advantageous option.

However, if an individual’s eligible expenses exceed their standard deduction amount, itemizing deductions can lead to greater tax savings. Common itemized deductions include certain medical and dental expenses that exceed 7.5% of adjusted gross income, and state and local taxes (SALT). The SALT deduction, which includes state income, sales, and property taxes, is capped at $40,000 for single filers and married couples filing jointly, and $20,000 for married couples filing separately, as of 2025.

Other itemized deductions can include home mortgage interest, which is deductible on mortgage debt for primary or second homes up to a certain limit. Charitable contributions to qualified organizations are also deductible if itemized. Beyond itemized deductions, individuals may also claim “above-the-line” deductions, which reduce adjusted gross income even if the standard deduction is taken. These can include contributions to traditional IRAs and student loan interest.

Write-Offs for Businesses

Businesses, including self-employed individuals and freelancers, can deduct ordinary and necessary expenses incurred in the course of their trade or business to reduce their taxable income. “Ordinary” means common and accepted in the industry, while “necessary” means helpful and appropriate for the business. These deductions reduce the business’s profit, which is the amount subject to tax.

Common business write-offs include office supplies, professional fees, and marketing and advertising costs. Business travel expenses are also deductible, encompassing airfare, lodging, and 50% of meal costs, provided the travel is away from the taxpayer’s tax home and requires an overnight stay. The home office deduction is available for those who use a portion of their home exclusively and regularly as their principal place of business, or as a place to meet clients.

Additionally, eligible self-employed individuals and small business owners may qualify for the Qualified Business Income (QBI) deduction, also known as Section 199A. This deduction allows them to deduct up to 20% of their qualified business income. This deduction can be claimed whether the taxpayer itemizes or takes the standard deduction, but it is subject to income limitations based on the type of business.

Supporting Your Write-Offs

Accurate record-keeping is crucial for substantiating all claimed write-offs to tax authorities. Taxpayers should maintain detailed records such as receipts, invoices, canceled checks, and bank statements for all deductible expenses. For business-related travel, mileage logs and expense reports detailing the business purpose of each expense are also important.

The general recommendation is to keep tax returns and supporting documentation for at least three years from the date the return was filed or the due date, whichever is later. This timeframe aligns with the statute of limitations for the Internal Revenue Service (IRS) to audit a return and assess additional taxes. In some situations, records should be kept longer.

Proper documentation protects the taxpayer in the event of an audit. If records are not sufficient, the IRS may disallow claimed deductions, leading to additional tax, penalties, and interest. Maintaining an organized system ensures that all necessary information is readily accessible to support the legitimacy of claimed deductions.