im autistic and have reading disabilities so i dont understand anything google says 🥲
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Don’t feel bad. Even many people who use the term don’t really understand.
There are certain things the government wants to encourage. Donations to charity, saving for retirement, buying a home, etc. So what they’ll do is they’ll essentially agree to not tax some or all of the amount of money spent on these things. These are known as Tax Credits, Tax Deductions, or sometimes known as “write offs.”
But they don’t KNOW how much money you’re going to spend on them until you do it. *This is why we have to file taxes every year*. We have to settle up the actual amounts. So if you maxed your Traditional IRA, you put that in your tax return and the government says, “Oh, I need to give you your $1,320 back that I withheld assuming you’d be paying taxes on this $6,000.” That’s what your tax return is.
One common mistake people make, is a tax write off is basically never PROFITABLE. People have this delusion that you can do things like, spending $10,000 and saving $50,000 in the process. That’s basically *never* the case. You might spend $10,000 and have $3,600 given back, but you still spent $6,400. It’s never PROFITABLE.
But that’s pretty much it at it’s most basic. A “write-off” is taking an action that’s going to be used to reduce your tax liability.
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