What Are Tax Write-Offs?

By Adam Levy – Updated Dec 13, 2024 at 10:34 AM

Key Points

Tax write-offs allow businesses to reduce taxable income by recognizing asset impairments.
Common write-offs include unpaid bank loans, overdue accounts, and damaged inventories.
Write-offs improve cash flow by lowering tax payments, increasing cash on the balance sheet.

A tax write-off is a business expense resulting from the reduction in the value of an asset. It’s an accounting maneuver that allows a business to reduce its taxable income, resulting in a lower tax liability at the end of the year that the write-off is taken.

Every scenario is different, but the basic idea behind a write-off is an asset is impaired in some way, and the business is realizing the impairment in its balance sheet when it takes a write-off.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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