December 11, 2004

• You're right in your calculations, rolypolyman, though business owners want all the business expenses they can justify to try to bring down taxable income - a bunch of $20 savings accumulating over the year is nice if you really needed the widgets and gizmos. Going too far, however, can make your financial statements look really bad and make it difficult to get loans, etc.
• It sounds to me like people who own their own businesses who are cheating on their taxes by claiming said widget as a business expense even though it will be used purely for their own private widget enjoyment.
• How much does one need to use said widget for the business to justify it as a business expense? Seems like any rules would be not easily enforceable, unless it was patently obvious that the purchase was not for the business, like a plasma HDTV for a daycare...for blind children. Monkeyfilter: Private widget enjoyment
• Does "tax writeoff" mean shrewd spender, wannabe big shot, or is it just hyperbole? For me it means seeking out any excuse I can get away with. i.e. I have an apartment on the back of the house I rent out and can claim anything I spend on the house. I also declare a home office and claim income from it. Makes for more write-offs on the house. Medical expenses are great as well. Anything to keep my income is game to me and I read the legislation all the time looking for more ways. Last year I managed to get my husband declared disabled so now I'm his keeper - literally and can write him off. /did I really say that? oops. /only in Canada.
• Don't forget self-employment (SECA) taxes. Self-Employment Contributions Act (SECA) tax is basically the business owner's version of the FICA tax that employees pay. Like FICA, it is made up of your "contributions" to both the Social Security and Medicare programs. However, the basic tax rate for the self-employed under SECA is 15.30 percent -- twice the 7.65 percent rate that employees must pay on their paychecks as FICA tax -- to reflect the fact that employees pay one-half the FICA tax and employers pay the other half. So anything you can purchase and "write-off" on your business means that you are lowering your business profit (the amount you must pay 15.3% SECA tax on) in addition to lowering your total income (on which you pay that other tax percentage - 23% in your example). So, no... it's not like your are getting it free, but if you want something, you can look at it as if you are getting it for 1/3 off the regular price because if you don't buy it that amount is going to the government anyway. (all how you look at it)
• You have it right, rolypolyman. "Writing something off" is really like getting a markdown on the item. It does not mean that the item is free, by any means. I do sometimes wonder if some of the more boisterous idiots out there think that they are buying something free. I think that the goal of this activity is to find a way to "write off" the things that you already purchase or have to make payments on. Buying new items at a discounted rate does not seem that impressive. But if you can figure out how to write off your car, a loan, furniture, or something else that you have to pay for anyway, then I think you are accomplishing something.

• How much does one need to use said widget for the business to justify it as a business expense?

  Don't know about the States, but for items that are mixed private/business use here in NZ, I assess the proportion and that's what can be claimed. Hence, since I maintain an office at home, a percentage of the house expenses can be claimed. Of course, it's better to be conservative in these estimates, since one day they may have to be defended to the tax man.
• Yeah, home offices in the states are something they really look at. But with the cuts in budgets here, I'm not sure that they'll track them as they might have in the past.
• I have sometimes felt justified taking deductions for some of my only-privately-enjoyed widgets because 1) the tax code is, I believe, slanted against the self-employed and 2) there are always things that you could have legitimately deducted but didn't because you forgot about them or couldn't find receipts for. I'm not, however, talking about large scale willful fraud, like writing off an SUV. Only large corporations or professionals are allowed to get away with that stuff per the tax code.
• At the casino I used to work at we didn't take business credit cards even if the business was named after the person who had the card. However, people would always try it and get pissed when we turned them down. I always made a mental note to never do business with any of those people if that's the way they manage the money for their business...
• Also, if you can get your taxes down to the next tax bracket, it's a significantly greater savings, but still not free.
• correct rpm, what you do is write it off as a bidness expense, meaning you don't pay taxes on that expenditure. Basically it means that you pay 25% less for what you purchase. Yes, big-shot too. (Back when I was a business owner I used to say "I'll write it off" having absolutely no idea what it meant just to sound cool) Having said that, please hire an accountant. I've never paid less taxes and lived so well. Donate the balance to me if you feel guilty.
• *holds hand out
• What? No one wants a Free SUV? There's your 100% tax-write-off, and for such a worthy cause!
• In 2004 every dime I earned before April 11 was a "voluntary contribution" to a wide range of government foolishness. My City of Chicago property taxes for 2005 tripled. My S corp business deductions are all that keeps the thieving bastards from taking it all. /Let me tell you how it will be; There's one for you, nineteen for me