What Is Considered a Tax Write Off for Businesses?

Tax time is always a very frustrating time for many businesses. You work hard all year and end up having to pay back so much of what you earned. However, tax write offs can help you get back some of this money and decrease how much you need to pay. These write offs are usually fair and reasonable, allowing you to get the money you deserve without denying the IRS what it deserves at the same time.

So, just what is considered a tax write off? That’s what we are here to help you understand. In this detailed article, you’ll get a better understanding of the nature of a tax write off and a listing of a few of the most common options. When you’re done reading, you’ll have a better understanding of what to expect here. You can then use this information on your next tax season, saving yourself real money.

So Just What is Considered a Tax Write Off?

Before delving into the nitty-gritty and listing the many write offs allowed by the IRS, it is wise to understand just what this term means for your business. A tax write off is anything that you purchase or any services you pay for that is required for your business operation. The IRS is pretty specific about what is and what is not a write off, so it is vital to get a feel for this before you start your taxes.

For instance, a company-sponsored dinner is considered a tax write off because you may do business there or may be entertaining potential customers or partners. However, a night out at the bar with you and a co-worker simply for fun is not considered a write off because it is not necessary for your business operation. Though it may build morale and friendship, it is not strictly necessary.

The same is true of any other personal expenses that you or your employees may incur. For instance, insurance on your private car is not a write off, but a policy on any vehicle you use for business purposes will qualify. And no, driving to work does not count, nor does it count if you occasionally use your car for some deliveries. The vehicle has to be specifically and only used for business.

Without getting too much in depth here, it is good enough to understand that most of your business expenses will be considered a write off. This means that you can use them to off-set your taxes owed. If you’re clever enough with this type of write off process, you can cut your taxes to a minimum. But you need to be careful and legal because the IRS will investigate if they find your expenses don’t make sense.

That’s why it is so essential to understand the question ‘what is considered a tax write off?’ and to take time to answer it for yourself and your employees. Doing so will make it easier for them to understand what they can and cannot consider a write off. This step is further critical because you must pay attention to what your employees write off to avoid complications with your taxes.

Standard Business Expenses – What is Considered a Tax Write Off That is ‘Ordinary and Necessary’?

Every business has what the IRS considers ‘ordinary and necessary’ expenses. These expenses are critical for keeping your company afloat and can be written off with ease. What is considered a tax write off of this type? Understanding this fact will help make it easier for you to prepare your taxes without staring at a huge bill that you may not be able to afford. Just a few of these expenses include:

  • Most types of bank charges are considered write offs by the IRS
  • Commissions and sales provide you with many tax write off possibilities
  • Credit and collections can be written off if they impact your business
  • Contractor labor costs, i.e., hiring someone outside your business, can be written off
  • Licensing training and fees can be written off for your business operation
  • Travel to work with customers, partners, or attending conferences
  • Utilities necessary for your business operation
  • Any gifts you may give to customers or your clients

Other things considered ordinary and essential include consultation, delivery, dues, subscriptions, equipment rental, factory expenses, most insurance types, interests paid on your business, pension and profit sharing, professional development, promotional help, rent, and mortgage payments. Salaries, wages, and other compensation are also considered a write off for most business operations.

That said, there are many other types of expenses that fall outside of this listing. Fully understanding these will help make it easier for you to find the write offs that make the most sense for your needs. And remember that not all of these expenses are 100 percent deductible. Some can only be deducted at a limited percentage, so make sure that you work with your tax professional to avoid complications.

Business Structure Upgrades – What is Considered a Tax Write Off for This Purpose?

When upgrading your business building, there’s a good chance that you’re going to pay a lot of money for a variety of different services. And just about all of these can be written off on your taxes, depending on a variety of different circumstances. Understanding when you can and cannot write off these expenses is critical for ensuring that your taxes go as smoothly as possible:

  • Commercial Fire Alarm Installations – High-quality fire alarms are essential for the safe operation of any business. When you install or repair these alarms, you are investing in your business and its safety. So these alarms are considered write offs, thankfully, as are security upgrades and installation.
  • Air Conditioning Repair – An HVAC system is critical not just to customer and employee comfort but also to safety. If it gets too hot or cold during the summer or winter, these systems can prevent dangerous freezing and overheating situations. So these repairs are definite write offs.
  • Structural Improvements – When adding new elements like epoxy flooring, stronger roofs, enhanced walls, and other upgrades to your building, you can usually write off these expenses. Talk to your tax expert to ensure that you don’t make any mistakes with this type of write off.
  • Utilities Repair – Repairing various utilities throughout your facility, such as plumbing or electric repair, usually fall under a write off. These repairs help to keep your business operating smoothly and prevent potentially dangerous and unhealthy situations in your facility.
  • Auto Body Shop Help – When you need to send your business vehicles to the auto shop, you can write off these expenses. Remember: you cannot write off your private vehicle, even if you occasionally use it for business expenses, because you primarily use it for personal reasons.

Now, what is considered a tax write off and what is not for these types of upgrades? Just about every kind of repair is a write off because they are necessary for business operation. But are new business signs and physical advertising considered write offs? Yes, these methods are deemed essential ways of bringing in new customers to help your overall success.

Legal Help – A Critical Write Off

All businesses need some legal help from time to time. Even if you don’t end up needing help from your lawyer, having them on your staff can be pricey. And you can write off their expenses because they are essential to your continued operation. These services can take on many different forms and provide you with many benefits. So, what is considered a tax write off for legal services? These services include:

  • Tax Preparation – When it comes time to get your taxes ready in April, you can write off any help you get. So if you have an accountant or another tax professional who helps, you can use them as a write off. You cannot write off self-help software like TurboTax because you’re still doing your taxes yourself.
  • Business Attorney – If you run into legal trouble in any way, you may need an attorney who can help. These professionals are a write off because their services help your company run smoothly without any difficulty. They can be written off for just about any situation and are great to include in your taxes.
  • Legal Representation – When you get sued for any business-related situation, you can write off the services of lawyers and other legal experts. Even if you end up winning your case, you can still write off your legal help as a way of ensuring that you don’t experience financial troubles.
  • Liability Help – All businesses need protection from liability problems, such as getting sued if someone gets injured on your property. This type of legal protection is an easy write off, even if you don’t end up needing any real help during your fiscal year.

As you can see, there are many different legal elements that you can write off to ensure that your taxes are smooth and adequately prepared. Make sure to pay attention to these facets to avoid mistakes. Talk to your tax preparation experts about any confusion you might have about these write offs. And remember to write off their advice to you. That’s the cool thing about tax help: you can always write it off.

Equipment Rental – What is Considered a Tax Write Off for These Services?

You may be surprised to know that equipment rental falls heavily into the category of tax write offs. But then again, it makes a lot of sense. You probably need a handful of different equipment to operate your company. In this situation, what is considered a tax write off for equipment rental? Thankfully, just about every type of equipment that you rent will fall under this heading.

It is essential to understand the various options that you may consider when renting high-quality equipment for your company’s needs. Just a few different options that you may end up needing include:

So is equipment never a tax write off for your business? Few instances exist when equipment won’t be considered an essential and necessary element for your business operation. For example, renting office equipment like printers and scanners is regarded as a write off. Even purchasing these items is a write off because they are essential to your continued operation as a company and need to be bought.

The only time that this type of rental may not qualify is if you use it for personal gain. For instance, if you rent equipment to clean your car or your home and try to write it off as a business expense, you’re going to end up annoying the IRS. Remember that you can only write off items that you use just for business operation and not for personal use. This simple fact will help you avoid errors in accounting.

Are You Ready for Tax Season?

Take your time to process all of this information and talk to your tax preparation expert about it before you visit. If necessary, you can ask them, ‘what is considered a tax write off?’ for your specific business. For example, if you run a personalized writing service and provide content for many people, you may need help identifying standard write offs you can utilize for your tax paperwork.

Just as importantly, you can make sure that you don’t overpay or underpay by too much. Often, many businesses play it safe to avoid potentially breaking the law. Others will take too many risks and end up getting caught. Working with a good tax professional can help you here, understanding the full range of your write offs and what is considered to be such for your business.

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