You can declare to the IRS that some of your income should not be taxed.
Basically, the government, instead of funding things, will say “if private people/businesses fund this thing, we won’t tax that money” as a way to incentivize people to do certain things. Buying a house, having children, installing renewable energy, etc.
I have a home mortgage, and tax law says I can deduct the money I spend on the interest on that mortgage.
So if I make $100k in a year, and I’ve paid $10k in interest on my mortgage, I will only get taxed on $90k of my income (this is really dumbed down, and there’s more complexity, but this is more or less what it is).
So it’s not “free money.” It’s more like a discount. If you’re being taxed at 30%, spending money on something deductible is like getting a 30% discount on it.
In a business, any expenses that you spend to do business (like office supplies, salary for employees) is also a tax write-off.
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