I meant you were the first on this thread to use the phrase "write off."

The people you mention are the typical example of 99% of the population that thinks if it's a "write-off" then I bought "X" for free. "The government bought my new toy! Boy, I really screwed them!" Is this what they really think? How stupid do they think the lawmakers and the IRS are?

It must go something like this:

"I paid $1,000 for a high-end widget which I have absolutely no use for -- I bought it for the "write-off" and I saved $200 on my tax bill, so life is good!

"Now I have a completely useless widget and I'm out $800. But I screwed the government!"

 

Me too, until I had to quit for health reasons. Put a lot of money in that Johnny Walker!

 

I agree with you , being a small business owner . All of the "write offs" and depreciation used over the years … and capital gains that you eventually face when you retire and liquidate , are a very real concern .

 

While I agree with that, What I usually find is "$XXXX off MSRP or X.X% for XX months. You have to do the mental gymnastics to determine which is really the better deal.
Just sayin...

 

Seems like this thread has really moved away from what the OP was initially asking.

Maybe I missed something along the way ?

 

Bruzee, I'm no accountant, either, but I think you are using the dreaded term "write off" incorrectly. Your business has operating expenses ie cost of goods, labor, equipment, etc.
You can "write off" int, deprec, taxes, and amor after subtracting business expenses.
I think.
I do know...you have to have income or profit to have a "write off". Otherwise it's a loss carry forward...

 

For the sake of simplicity, ALL business expenses are deducted from your gross sales and you pay income taxes on what's left. A "write-off" is street slang for a deduction.

If you want to complicate it (which we shouldn't do until the basics are understood) large capital expenses are not fully deducted the first year, but are divided up over five years (last I knew anyway, it used to be seven years but the number isn't relevant).

So let's say you buy a $50,000 machine. You would deduct $10k from your gross income each year for five years, lowering your taxable income which is the point of the whole discussion.

If you have use for the machine and can earn income from it, then the tax code encourages you to buy it and expand your business. If you have no use for it but just bought it for the "write-off" then you're out fifty grand and have a useless hunk of iron.

It ain't rocket science.

 

You are right , my apologies . I started to answer OP the other day and got side tracked . I am 55 , worked all my life , started a business 22 years ago . I have provided for my family (Put money back for a rainy day ,purchased real estate , vehicles , put daughter through college , paid for daughters wedding ) . Recently bought my first Corvette . On to another chapter in life and I have no regrets in the order I have done it .

 

At the time my income changed too rapidly to project my withholding. At the time the only way I knew to do that was to change my exemptions. I learned after that Also, I like to share experiences that the average person would understand and appreciate, rather than saying I kept an extra $40,000 in my bank account. I always try to owe the IRS rather than they owing me. I also roll my eyes at people who can't wait to get a big tax return so they can make a big purchase. I was just a regular working guy, not running a business. I didn't know I was getting $40k back until I filed my taxes. This past April I paid out $1500 when I did my taxes. My bonus was more than expected, plus on the last day of 2017, my company gave everyone that $1000 bonus from the tax bill.

 

Same here. I do run a small business on the side working when I have time.....just some IT stuff and Point of Sale HMI programming. I was making pretty good and then the IRS wanted estimated tax payments quarterly.

I cut the side job way back, and try to break even or slightly owe at the end of the year.

 

I'm 37. I do IT and Software development. I get paid much less than industry avg. I bought a high mileage, somewhat worn out C6 for the same price as a used family sedan. You can find C6s much cheaper than a no-mileage show piece, especially if you plan on just driving it and not worrying about minor scratches and paint sworls.

 

"my company gave everyone that $1000 bonus from the tax bill"

This post has stretched pretty far from the origin, so I might as well stretch it further..."my company gave everyone that $1000 bonus from the tax bill". Is that the money from the new tax bill that the lovely Ms. Pelosi said was "crumbs", and "didn't matter"? I'm just curious how many people I have come across who picked up some of those crumbs...you are the 4th or 5th, can't be sure.

Anyway, for the OP, you have gotten yourself quite a good bit info from your post. Lots of great testimonials on the kind of stuff most people learn over decades. Consider it wisely, and best of luck to you.

 

I'm 76 and semi-retired. My first job was a professional killer. After I finished my time with the US Army, my next job was being a drug dealer. At that time pharmaceutical sales didn't pay much. I really wanted to be an extortionist and work for the IRS checking business accounts, but needed to first get business experience to learn how the system worked. Then after working for 12 small manufacturing companies in different capacities, I started my own business at age 49. It was a tough start, but since I had worn lots of hats previously, I made it work in spite of the 1990-91 recession that hit the aerospace industry fairly hard. I eventually expanded to include three C-corps, an S-corp, and two sole-proprietorships. Buying and selling between businesses can help with taxes, if you handle it properly. I had long periods without personal income and a few large paychecks that got used to buy more/better machinery to increase profits. Then the housing crash in 2007-9 nearly destroyed it all, as it went from 7-figure sales with 40 employees to 5- figures with 1, as all but one business closed by 2011. Closing multiple businesses is like parting out cars. You can sell off assets to another business at a loss to nearly bankrupt them, while the business who is the buyer can sell them at a profit. It's like musical chairs while the last business spreads out the remaining asset sales over several years. That's my rags to riches to rags story and I was too old to start over. I'm still having fun though and that's all that really matters.

 

Yup....There are so many mis-conceptions on how one should handle their $$$ it's mind boggling. It use to be...maybe still is....(but i've always been a little skeptical about it) is the one that buying a house is a great investment. With all things being equal...and staying true to a 30 year fixed......then you sit down and add up (I mean really sit down and add up every little thing) all the money spent on a home during a 30 year period......might surprise you what that figure is. I've always owned a home, but I look at it as more of a savings account more than anything. If I make a little extra due to housing boom than all the better.

 

 

Assume you bought a $50,000 house in 1980 ( a nice house at the time) with a 3.5% interest rate and $10,000 down to have a $179 monthly payment using your $500 monthly wages. The average annual inflation in that 30 year period was 3.51%, but in 2010 you were still making the same $179 payment with your $1,407 monthly wages. Admittedly, the loan interest was heavier on the first end, but your dollars stretched farther as the years went by.

 

 

I am 71 going on 73 - retired Mech Engineer and now a Professional Amateur golfer -- paid cash for 2 Grand Sports.