What Does Tax Write-Off Mean?
Sp, what is a tax write-off, exactly, and how does a tax write-off work? A tax write-off or deduction, is a business expense that can reduce your taxable income, affecting the calculation of your federal income tax. Your tax rate and tax brackets play a key role in the total amount of your tax write-off, meaning as long as you are paying some tax, a deduction is worth a specific percentage of your return, based on your tax bracket.
Therefore, if for example, your yearly taxable income in a tax year is under $46,000, a deduction is worth about 25%. If your taxable income is between $46,000 to $92,000, the deduction is worth 34%. If your tax bracket is between $92,000 to $142,000, it is worth 42%; anything between $142,000 and $203,000, is 46%; and anything over a taxable income of $203,000, a deduction is worth 50%.
For example, a write-off of an expense for $100 is actually worth anywhere between $25 and $50 to you, depending on your tax bracket.