It’s A Write Off! What Does That Really Mean

It’s A Write Off! What Does That Really Mean

Many business owners think write-offs make expenses free—but in reality, you’re still spending real money. A tax deduction just lowers your taxable income, not your actual costs.

Before you buy that new business car or book that “work trip,” let’s break down what a write-off really means (and why it’s not a magic loophole).

What Is a Write-Off, Really?

If you've ever watched Schitt’s Creek, you might remember the scene where David assumes everything is a write-off—without actually knowing what that means. And let’s be real, a lot of people have the same misunderstanding.

In the simplest terms, a tax write-off (or deduction) is an expense that reduces your taxable income. For business owners and self-employed professionals, this means that certain costs related to running your business can lower the amount of income you pay taxes on.

For example, if you're a real estate agent and spend $1,000 on marketing, that expense could be deducted from your taxable income—meaning you won't pay taxes on that $1,000. However, this does NOT mean you get that money back or that it's "free." You’re still spending the money; you're just reducing the income that gets taxed.

The Myth of the "Free" Write-Off

Many people think, “Oh, I’ll just write it off,” as if it magically makes the expense disappear. In reality, write-offs only reduce your tax liability, not eliminate the cost entirely.

Let’s look at an example with a business car purchase:

Scenario: Buying a $60,000 SUV for Your Business

You’re a real estate agent and decide to buy a $60,000 SUV, thinking, “It’s a write-off, so it’s basically free!”

If the vehicle qualifies for the Section 179 deduction, you may be able to deduct $31,300 (2025) from your taxable income in the year of purchase. Sounds great, right?

How the Tax Savings Actually Work

Let’s assume you’re in the 25% tax bracket.

A $31,300 deduction means you don’t pay taxes on that portion of your income.

25% of $31,300 = $7,825 in tax savings.

But Here’s the Catch…

Even though you saved roughly $8,000 in taxes, you still paid $60,000 for the car! That means you’re still out $52,000 in real money.

If you didn’t actually need the SUV, then you just spent $60,000 to save $8,000—which isn’t typically a smart financial move.

The Right Way to Think About Write-Offs

A tax deduction only helps you if the expense is something you actually need for your business. If you were already planning to buy a business vehicle, then the write-off is a great bonus. But spending money just to “get a write-off” is a losing game.

Not Everything Is a Write-Off

The IRS has clear rules about what counts as a deductible business expense. It must be:

• Ordinary – Common and accepted in your industry.
• Necessary – Helpful and appropriate for your business.

So, while office supplies, marketing, and professional development might be deductible, that trip to Hawaii (unless it’s truly for business) is not. And if you try to write off personal expenses as business ones, you could be setting yourself up for trouble with the IRS.

Bottom Line: Write-Offs Are Good, But They're Not Magic

Tax deductions are great for reducing taxable income, but they don’t mean "free money." Smart tax planning means making necessary business purchases while maximizing legal deductions—not using "write-offs" as an excuse to overspend.

Have questions about what you can actually write off? Schedule a time to chat with our team.