A little finance lesson for ya today since we’re just about at tax time.
Just write it off.
It’s a tax write off, no worries.
I hear this time and again. Sometimes friends will say it and laugh knowing what it really means but some people say it in a different way. That item (the write off item) still costs money. That money has to come from somewhere. Sometimes its said like the “right off” money is magic. Sometimes I say it like it’s magic. It’s a tax write off. That makes it all… something different than an expenditure in many minds.
Every sheep I buy is a tax write off. That just means I can make a note of it on my taxes as an expenditure. I have had to buy the animal, pay the vet bills, pay for the food…. At the end of the year I’ve put a lot of money (not even counting time, sweat, tears, and sometimes blood or broken thumbs) into this animal. I love that animal and I would consider them a pet. If I sold the biz, I’d have to “sell” the animal back to myself personally to keep them. They are now an asset of the biz and not a pet in the eyes of the government.
Anyway – the tax write off didn’t bring me magic. The tax write off didn’t help me shovel manure or pay for a single bale of hay. What it does is it allowed me to say – yes, I spent this money on a legit business expense and that offsets the money we made this year. That tax write off allowed me to maybe not have to pay quite so much in income tax because my income went into the biz expense. But then I need to make sure I count the fleece or sold offspring from that animal as income. Expenditure on one side, income on the flip.
Now, there are magical tax write offs. Some of them are even legal. I’m not going to talk about the illegal ones. You probably have an idea of what they are and really, lets be honest, the little guys don’t get away with that kind of write off so we don’t even attempt it.
The more magical write offs are the times when I might speak for free at an event that should have paid me. This is something I explained to a friend recently. Let’s say I charge a $250 speaking fee. My favorite guild is having a big fund raiser for a member that has fallen ill and has asked me to speak there and give them my speaking as a donation. This isn’t something I’m spending money on necessarily but I won’t be making my fee if I do this for free. I ask for a charitable note. If I do this event I’m essentially making a charitable donation. No money is exactly changing hands but I am donating my professional time. Personal time is different but professional time should be paid for whether it’s paid in cash or a charitable donation.
So far, that’s the only magic I’ve found in the tax write off. Even that one isn’t that much of a “write off”. I’ve been self employed for over 20 years now. I think it was an eye opener for me to realize how little that “tax write off” meant. Though, if I hadn’t ever been self employed or employed as a tax accountant, I might never have realized this.