Let’s say that I have this one movie that is finished that I spent 80 million to make. I decided to “write it off”. So when I get to pay my taxes, do I get a 80 million discount?
Let’s say that I have this one movie that is finished that I spent 80 million to make. I decided to “write it off”. So when I get to pay my taxes, do I get a 80 million discount?
I’m seeing a lot of complicated explanations so I’m gonna go with a simpler one.
Say you build a fence for somebody and they pay you $1000. You have to report that income to the IRS. Let’s say the tax rate is 40% so they say “Well you owe us $400.” But instead you provide them with receipts saying you bought $500 of supplies in the form of lumber, screws and such. You have “written off” your expenses and shown the IRS you really only made $500 so you only owe $200 in taxes.
What I have trouble wrapping my head around is what else can you write off? How far can this go? I’m thinking of making an LLC for example to hold real estate, cars, buy stuff using its credit card. Can I do whatever I want and try to call it a company expense?
In the case of your fence can you write off the truck, gas, computers you used to do research, house you used to plan out the project?
You’re supposed to include an approximate percentage of personal vs business use. Generally this isn’t really policed, but if it’s clearly 100% personal and you say it’s 100% business, that’s a disaster waiting to happen.
Also using stuff like this while making less than a million a year is going to bump you up several notches on the “people to be audited” list.
“Tax evasion”.
Write offs are a scam because of this big gray area. The rules get complicated fast and it quickly becomes less clear whether you can or not, and they’re difficult to automatically check. So …. You can write off any expense, up until you get caught. Remember this next time you see a politician wanting to reduce funds for IRS audits.
For all the dread people fear at the word “audit”, remember who really has the most to fear, and it’s not you
FYI - my own experience with the dreaded IRS enforcement was …. Receiving mail that something was wrong on my tax form and if I agreed, they calculated how that would change what I owe. I took a look, and “yep, my bad”, and paid the correct amount. No fees, no penalties, minimal paperwork, no threats, no bullying. Just facts. Ooooh, nightmares
Yes write off rules get complicated fast. People generally agree with the very simple example I’ve given but all you have to do is ask “What if you bought a drill while building the fence?” and you’re gonna trigger a whole host of opinions.
But I think sometimes people only see the complicated examples and think “write offs are a scam got it” so I think it’s important to provide an example where most people would generally agree it’s not. It helps people realize there’s some nuance to the discussion.
That being said: Tax the fucking rich already.
Sell things on eBay, you have to pay taxes on any profit, but you can claim milage as an expense at 65.5 cents per mile. There’s no UPS dropoff near me, but there’s one near my work, so I claim the mileage to go to the UPS store and back. I just happen to go to work in between those two things.
You can also claim travel if you buy an item somewhere. Maybe you went somewhere to buy something and just happened to have a good time with your family while you were there.