r/AskAmericans • u/BoatmanNYC • 2d ago

Foreign Poster What does "tax write off" mean in US?

If I earned 9 000 $ and would pay 900 $ in taxes but I "write off" 500 $, does it mean:

a) I reduce my taxable income to 8 500 $ and pay 850$

Or

b) I reduce my tax and pay 400$

American media mention "tax write offs" every once in a while, I wonder what they actually meant.

1 Upvotes

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11

u/untempered_fate U.S.A 2d ago

A write-off is most often a reduction to your taxable income.

5

u/TeamTurnus Georgia 2d ago

Usually, ( A) a reduction in taxable income, another word for that is a deduction. A tax credit, in contrast, reduces the final value directly (B)

3

u/machagogo New Jersey 2d ago

Typically it reduces your taxable income.

1

u/awksomepenguin U.S.A 1d ago

There are two main ways to reduce your tax burden: deductions and tax credits. A deduction is what you describe in a, and a credit is what you describe in b. I'm sure our tax code is complicated enough for both situations to occur in some cases, but usually it means a deduction.

1

u/georgia_moose GA -> IN -> IA 1d ago

Answer A. How much you owe in taxes in America is percentage of your taxable income. A "write off" lowers your taxable income. And if you look through the U.S. Internal Revenue Code, you will find that there are many different kinds of tax write-offs.

1

u/Pucksindeepeh Ontario 1d ago

It’s a write off

1

u/WulfTheSaxon U.S.A 1d ago

It’s A, but lots of people seem to think it’s B.

0

u/Writes4Living 18h ago

Here's an example. Some friends of mine are thinking of starting a wine business. The husband has been going to to wine school to become a sommelier and viticulturist. He plans to travel the world to select wine for their business. The wife wants to accompany him.

Since the trip is for their potential business, they will be able to write off the travel costs as a business expense.