There is No Such Thing as a Tax Write Off
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In the immortal words of Jerry Seinfeld: “You don’t even know what a write-off is.”
Fans of the ‘90s sitcoms will of course reply: “Do you?”
Unlike Jerry, yes, I do.
A write-off is an incredibly misleading nickname for an expense that can help lower your taxable income. It is not a magic trick that suddenly makes something free. The term the IRS uses is tax deduction. While those terms are often used interchangeably, great financial advisors know there is an important difference. That difference is how taxpayers, your clients, react to them.
I have worked with enough taxpayers (and advisors) to know that saying “write off” versus “tax deduction” elicits very different emotions. That is not to say that a tax deduction is universally understood. But something being deductible is rarely confused with being free, as is commonly the case when taxpayers talk about write offs. Using the right terminology helps a taxpayer take a more intentional and informed approach. It is an important step in helping your clients understand how to reduce their taxable income.