![]() ![]() ![]() A reduction in the value of an asset or earnings by the amount of an expense or loss. Similarly, banks write off bad debt that is declared non collectable (such as a loan on a defunct business, or a credit card due that is in default), removing it from their balance sheets. In commercial or industrial settings, a productive asset may be subject to write-off if it suffers failure or accident damage that is infeasible to repair, leaving the asset unusable for its intended purpose. Common write-offs in retail include spoiled and damaged goods. The item's potential return is thus canceled and removed from ('written off') the business's balance sheet. In business accounting, the term 'write-off' is used to refer to an investment (such as a purchase of sellable goods) for which a return on the investment is now impossible or unlikely. For example, a telemarketer may deduct the purchase of a phone, since phones are used normally and necessarily in their work, whereas a saxophonist may not. This means that deductible items must be usual and required for the business owner's field of work. In order for business owners to write off business expenses, the IRS states that purchases must be both ordinary and necessary. Thus the net cost of the telephone is $75 instead of $100. If that person is in a 25% tax bracket, the tax due would be lowered by $25. Thus, if a person in the United States has a taxable income of $50,000 per year, a $100 telephone for business use would lower the taxable income to $49,900. In income tax calculation, a write-off is the itemized deduction of an item's value from a person's taxable income. In income tax statements, this is a reduction of taxable income, as a recognition of certain expenses required to produce the income. ![]() In accounting, this is a recognition of the reduced or zero value of an asset. For insurance write-offs, see Total loss.Ī write-off is a reduction of the recognized value of something. ![]()
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