What Can a Business Write Off on Taxes?

by Jordan Meyers

While you start a business with the intention of earning a profit, many situations arise that have the potential to reduce the money that ends up in your pocket. Among the things that lower your profit potential are the taxes you pay to federal, state and local tax agencies. Tax write-offs, on the other hand, can help you lower your tax liability and maximize your profits.


A tax write-off is a monetary amount by which a business can reduce its taxable income. Reducing taxable income typically translates into a decrease in the overall amount of taxes for which the business is liable. In most cases, tax write-offs reduce a business's tax liability by a percentage rather than by a dollar-for-dollar amount.


Several types of business write-offs exist. The costs of goods make up one category. This can include the money your business paid for products it sold as well as any costs incurred in producing goods for sale. A business can also write off the costs it incurred in providing a service. Rent is another type of business write-off. You can usually deduct a portion of the rent for business use of your home and all of the rent for a property you use for business only. Expenses you have for payroll and retirement funds can generally be deducted as a business expense as well. Taxes you paid to various tax agencies, interest on business loans and business insurance costs may also qualify as write-offs. In addition, you may write off a range of expenses you incurred in the course of running your business, including money you spent on supplies, utilities, phone and Internet service, travel expenses, and meals and entertainment directly related to your business.

Time Frame

Many business write-offs remain effective year after year. However, deductions may change, be added or even be revoked each tax year. Therefore, it is important to review the allowed deductions each year before filing a business tax return. In addition, the write-offs allowed may vary based on whether you are filing taxes with a federal, state or local tax agency.


Some business people confuse tax credits with tax write-offs. They think tax write-offs will increase the amount of money they can expect as a refund. The reality, however, is that a business write-off usually reduces only your tax liability. To enjoy a larger refund, you generally need tax credits as well.


Never attempt to deduct personal expenditures as part of your business expenses. If you are audited, you may face fines and penalties. Instead, keep careful records of your business expenses and maintain a separate bank account for your business and personal funds. If you have some expenses that are both personal and business related, you will have to follow the tax agency's rules for figuring out what you can deduct. This may come into play, for example, when you have a car you use for both business and personal transportation.

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