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Simple English definitions for legal terms
tax write-off
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A quick definition of tax write-off:
A tax write-off is a way to reduce the amount of money you owe in taxes. It's like a special deduction that you can take for things like losing money on an investment or spending money on business expenses. By taking a tax write-off, you can lower your taxable income and pay less in taxes.
A more thorough explanation:
Definition: A tax write-off is a deduction of depreciation, loss, or expense that reduces the amount of income subject to taxation.
Example 1: If you own a business and purchase new equipment, you may be able to write off a portion of the cost of that equipment as a depreciation expense on your tax return. This reduces your taxable income and can lower your tax bill.
Example 2: If you donate money to a qualified charity, you may be able to write off that donation as a charitable contribution on your tax return. This reduces your taxable income and can lower your tax bill.
These examples illustrate how tax write-offs can help individuals and businesses reduce their tax liability by deducting certain expenses or losses from their taxable income. By doing so, they can lower their overall tax bill and keep more of their hard-earned money.