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Isn't “I bought [blank] as a tax writeoff†complete nonsense?
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There's a trope in movies where people do something to keep from being bumped into a higher tax bracket (For example, in The Big Lebowski: "I'll have to check with my accountant, but it might bump me up to another tax bracket"). The thing is, that isn't how taxes work. This seems to be a financial version of "zoom, enhance, zoom, enhance..."
Similarly, I've seen dozens of movies/TV shows where people buy something "as a tax write-off", or "as a tax deduction". Sometimes they're cars or other expensive items, and sometimes they're donations. It seems the only reason they made that purchase/donation was for a tax deduction.
I didn't think that's how deductions worked. They don't save you money, they just reduce the money you've lost; they're a deduction of your taxable income. Is this another trope based on a financial inaccuracy?
To remove the movie aspect: Is a tax deduction ever a sole motivator for a purchase, or is it always just a "discount"?
taxes tax-deduction
asked 8 hours ago
Lord Farquaad
265129
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up vote
4
down vote
favorite
There's a trope in movies where people do something to keep from being bumped into a higher tax bracket (For example, in The Big Lebowski: "I'll have to check with my accountant, but it might bump me up to another tax bracket"). The thing is, that isn't how taxes work. This seems to be a financial version of "zoom, enhance, zoom, enhance..."
Similarly, I've seen dozens of movies/TV shows where people buy something "as a tax write-off", or "as a tax deduction". Sometimes they're cars or other expensive items, and sometimes they're donations. It seems the only reason they made that purchase/donation was for a tax deduction.
I didn't think that's how deductions worked. They don't save you money, they just reduce the money you've lost; they're a deduction of your taxable income. Is this another trope based on a financial inaccuracy?
To remove the movie aspect: Is a tax deduction ever a sole motivator for a purchase, or is it always just a "discount"?
taxes tax-deduction
asked 8 hours ago
Lord Farquaad
265129
Define "nonsense" - are you asking if it actually saves anyone any money ever, or, are you asking whether people are ever motivated to incur other expenses specifically to avoid paying taxes?
– Beanluc
6 hours ago
1
A lot of this trope dates back to the early '80's in the US where there were things that provided tax benefits much larger than their cost, so it was actually economic to do them. The Tax Reform Act of 1986 changed the tax code and made such maneuvers uneconomic.
– zeta-band
5 hours ago
add a comment |Â
up vote
4
down vote
favorite
up vote
4
down vote
favorite
There's a trope in movies where people do something to keep from being bumped into a higher tax bracket (For example, in The Big Lebowski: "I'll have to check with my accountant, but it might bump me up to another tax bracket"). The thing is, that isn't how taxes work. This seems to be a financial version of "zoom, enhance, zoom, enhance..."
Similarly, I've seen dozens of movies/TV shows where people buy something "as a tax write-off", or "as a tax deduction". Sometimes they're cars or other expensive items, and sometimes they're donations. It seems the only reason they made that purchase/donation was for a tax deduction.
I didn't think that's how deductions worked. They don't save you money, they just reduce the money you've lost; they're a deduction of your taxable income. Is this another trope based on a financial inaccuracy?
To remove the movie aspect: Is a tax deduction ever a sole motivator for a purchase, or is it always just a "discount"?
taxes tax-deduction
asked 8 hours ago
Lord Farquaad
265129
There's a trope in movies where people do something to keep from being bumped into a higher tax bracket (For example, in The Big Lebowski: "I'll have to check with my accountant, but it might bump me up to another tax bracket"). The thing is, that isn't how taxes work. This seems to be a financial version of "zoom, enhance, zoom, enhance..."
Similarly, I've seen dozens of movies/TV shows where people buy something "as a tax write-off", or "as a tax deduction". Sometimes they're cars or other expensive items, and sometimes they're donations. It seems the only reason they made that purchase/donation was for a tax deduction.
I didn't think that's how deductions worked. They don't save you money, they just reduce the money you've lost; they're a deduction of your taxable income. Is this another trope based on a financial inaccuracy?
To remove the movie aspect: Is a tax deduction ever a sole motivator for a purchase, or is it always just a "discount"?
taxes tax-deduction
taxes tax-deduction
asked 8 hours ago
Lord Farquaad
265129
asked 8 hours ago
Lord Farquaad
265129
asked 8 hours ago
Lord Farquaad
265129
asked 8 hours ago
Lord Farquaad
265129
asked 8 hours ago
Lord Farquaad
265129
265129
Define "nonsense" - are you asking if it actually saves anyone any money ever, or, are you asking whether people are ever motivated to incur other expenses specifically to avoid paying taxes?
– Beanluc
6 hours ago
1
A lot of this trope dates back to the early '80's in the US where there were things that provided tax benefits much larger than their cost, so it was actually economic to do them. The Tax Reform Act of 1986 changed the tax code and made such maneuvers uneconomic.
– zeta-band
5 hours ago
add a comment |Â
Define "nonsense" - are you asking if it actually saves anyone any money ever, or, are you asking whether people are ever motivated to incur other expenses specifically to avoid paying taxes?
– Beanluc
6 hours ago
1
A lot of this trope dates back to the early '80's in the US where there were things that provided tax benefits much larger than their cost, so it was actually economic to do them. The Tax Reform Act of 1986 changed the tax code and made such maneuvers uneconomic.
– zeta-band
5 hours ago
Define "nonsense" - are you asking if it actually saves anyone any money ever, or, are you asking whether people are ever motivated to incur other expenses specifically to avoid paying taxes?
– Beanluc
6 hours ago
Define "nonsense" - are you asking if it actually saves anyone any money ever, or, are you asking whether people are ever motivated to incur other expenses specifically to avoid paying taxes?
– Beanluc
6 hours ago
1
1
A lot of this trope dates back to the early '80's in the US where there were things that provided tax benefits much larger than their cost, so it was actually economic to do them. The Tax Reform Act of 1986 changed the tax code and made such maneuvers uneconomic.
– zeta-band
5 hours ago
A lot of this trope dates back to the early '80's in the US where there were things that provided tax benefits much larger than their cost, so it was actually economic to do them. The Tax Reform Act of 1986 changed the tax code and made such maneuvers uneconomic.
– zeta-band
5 hours ago
add a comment |Â
5 Answers
5
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oldest
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up vote
3
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I would say yes and no. I have spoken with people that don't want to pay off their home because they are getting a tax deduction on the interest. I've done the math for all of them and none of them are coming out ahead. The tax bracket reasoning is somewhat flawed because you don't pay 25% on all of your taxable income just because your marginal tax rate is 25%.
But there are times when a tax deduction could put you in a lower bracket and also allow to you get a larger child tax credit for example. That would be especially worthwhile if your money went to something of value, like an IRA. Or maybe you were going to give $500 to charity, but then you do the math and realize that if you give $1000 instead, you'll get an extra $250 back on your taxes. That extra $500 donation only really costs you $250, so it's a tax write off, but it didn't really save you anything. That's an extreme example, but with a bracket, a credit or two and an itemized deduction, you might find a sweet spot.
Health expenses are deductible at a certain point. In a year when you've already had significant expenses, you may realize that you'll be able to deduct a portion on your next tax return. If your marginal tax rate was 15%, you could opt to get that laser eye surgery you've been wanting this year. It would cost you at least 15% less than if you waited until the next year. So it's a write-off, but you still have to pay the other 85%.
Business purchases could also allow for savings. For example, an LLC could sign a lease on a car and 'write it off' as a business expense. For the sake of simple numbers, say they pay a total of $25K over 3 years and this reduces their tax burden by $5K over that same period of time. The total cost to the business is $20K for 3 years. If the owner had entered into the same agreement outside the business, he/she would have spent $5K more overall. The 'write-off' didn't really help the business, but since the business and the owner are essentially the same, it was beneficial.
Sometimes, it's made to sound like tax write-offs are a simple way to get buckets of extra money or lots of free stuff. That part is nonsense. But there are real tax savings to be had by studying the deductions and credits and doing some good math. Some tax accountants specialize in minimizing tax burden and can give you some direction for your personal situation.
answered 4 hours ago
DSway
24319
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
2
down vote
It is possible that some people may avoid additional income out of fear they may lose welfare benefits. If you currently have $30k of income and $5k of benefits, you might not want to earn an additional $3k if it would result in losing your benefits.
How common and significant welfare cliffs or poverty traps are is debated and political.
answered 5 hours ago
Charles Fox
33910
add a comment |Â
up vote
1
down vote
People do make tax-deductible purchases (and donations) which they might not have made if it hadn't reduced their tax liability.
If nothing else, it ought to be easy to see that what might be going on is they bought (or donated) more than they would have if the deduction hadn't made it cheaper to do so. A Lexus instead of a Toyota, for example, if it's justifiable as a business expense. Just because the way they talk about it is as simple as "I bought it as a write-off" doesn't mean that there isn't a lot more nuance behind the real situation.
Consider home buyers. If mortgage interest weren't tax deductible, there are lots of people who would buy 25% less house.
answered 6 hours ago
Beanluc
32214
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
add a comment |Â
up vote
0
down vote
No, the trope isn't "complete nonsense". Yes, people do sometimes focus solely on the tax-deduction aspect to justify purchases. Your Lebowski quote, however, seems to be talking about avoiding an additional amount of income due to the higher tax bracket.
I've heard someone say that they declined extra work because the additional pay would have bumped them into the next tax bracket, and he felt that the reduced after-tax pay for the incremental work wasn't worth the effort he'd need to put in.
Whether it's seeking a tax deduction or avoiding the next tax bracket, the psychology of the matter can't always be dismissed.
answered 5 hours ago
Lawrence
1,8031512
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
0
down vote
The idea of buying something as a tax write-off is that the asset that you buy reduces your tax liability by more than you paid for it. They are almost always artefacts of the tax code, intended to increase investment in some category. Generally tax authorities close the loopholes as fast as they become aware of them.
The closest thing to a tax write-off that I know of is my electric bike. It cost me $2,200 and reduces my taxable income by about $1,800 per year. It's not a true tax write-off because I actually have to use it, but it's a nice bonus, on top of being quicker than driving and far easier to park. The intention, I suppose, was to drive the adoption of electric vehicles by allowing an $.81/km deduction for business use instead of the $.73/km for petrol vehicles, but there's no check that the deductions claimed don't exceed the value of the vehicle.
answered 2 hours ago
Rupert Morrish
2,7772624
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5 Answers
5
active
oldest
votes
5 Answers
5
active
oldest
votes
active
oldest
votes
active
oldest
votes
up vote
3
down vote
I would say yes and no. I have spoken with people that don't want to pay off their home because they are getting a tax deduction on the interest. I've done the math for all of them and none of them are coming out ahead. The tax bracket reasoning is somewhat flawed because you don't pay 25% on all of your taxable income just because your marginal tax rate is 25%.
But there are times when a tax deduction could put you in a lower bracket and also allow to you get a larger child tax credit for example. That would be especially worthwhile if your money went to something of value, like an IRA. Or maybe you were going to give $500 to charity, but then you do the math and realize that if you give $1000 instead, you'll get an extra $250 back on your taxes. That extra $500 donation only really costs you $250, so it's a tax write off, but it didn't really save you anything. That's an extreme example, but with a bracket, a credit or two and an itemized deduction, you might find a sweet spot.
Health expenses are deductible at a certain point. In a year when you've already had significant expenses, you may realize that you'll be able to deduct a portion on your next tax return. If your marginal tax rate was 15%, you could opt to get that laser eye surgery you've been wanting this year. It would cost you at least 15% less than if you waited until the next year. So it's a write-off, but you still have to pay the other 85%.
Business purchases could also allow for savings. For example, an LLC could sign a lease on a car and 'write it off' as a business expense. For the sake of simple numbers, say they pay a total of $25K over 3 years and this reduces their tax burden by $5K over that same period of time. The total cost to the business is $20K for 3 years. If the owner had entered into the same agreement outside the business, he/she would have spent $5K more overall. The 'write-off' didn't really help the business, but since the business and the owner are essentially the same, it was beneficial.
Sometimes, it's made to sound like tax write-offs are a simple way to get buckets of extra money or lots of free stuff. That part is nonsense. But there are real tax savings to be had by studying the deductions and credits and doing some good math. Some tax accountants specialize in minimizing tax burden and can give you some direction for your personal situation.
answered 4 hours ago
DSway
24319
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
3
down vote
I would say yes and no. I have spoken with people that don't want to pay off their home because they are getting a tax deduction on the interest. I've done the math for all of them and none of them are coming out ahead. The tax bracket reasoning is somewhat flawed because you don't pay 25% on all of your taxable income just because your marginal tax rate is 25%.
But there are times when a tax deduction could put you in a lower bracket and also allow to you get a larger child tax credit for example. That would be especially worthwhile if your money went to something of value, like an IRA. Or maybe you were going to give $500 to charity, but then you do the math and realize that if you give $1000 instead, you'll get an extra $250 back on your taxes. That extra $500 donation only really costs you $250, so it's a tax write off, but it didn't really save you anything. That's an extreme example, but with a bracket, a credit or two and an itemized deduction, you might find a sweet spot.
Health expenses are deductible at a certain point. In a year when you've already had significant expenses, you may realize that you'll be able to deduct a portion on your next tax return. If your marginal tax rate was 15%, you could opt to get that laser eye surgery you've been wanting this year. It would cost you at least 15% less than if you waited until the next year. So it's a write-off, but you still have to pay the other 85%.
Business purchases could also allow for savings. For example, an LLC could sign a lease on a car and 'write it off' as a business expense. For the sake of simple numbers, say they pay a total of $25K over 3 years and this reduces their tax burden by $5K over that same period of time. The total cost to the business is $20K for 3 years. If the owner had entered into the same agreement outside the business, he/she would have spent $5K more overall. The 'write-off' didn't really help the business, but since the business and the owner are essentially the same, it was beneficial.
Sometimes, it's made to sound like tax write-offs are a simple way to get buckets of extra money or lots of free stuff. That part is nonsense. But there are real tax savings to be had by studying the deductions and credits and doing some good math. Some tax accountants specialize in minimizing tax burden and can give you some direction for your personal situation.
answered 4 hours ago
DSway
24319
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
3
down vote
up vote
3
down vote
I would say yes and no. I have spoken with people that don't want to pay off their home because they are getting a tax deduction on the interest. I've done the math for all of them and none of them are coming out ahead. The tax bracket reasoning is somewhat flawed because you don't pay 25% on all of your taxable income just because your marginal tax rate is 25%.
But there are times when a tax deduction could put you in a lower bracket and also allow to you get a larger child tax credit for example. That would be especially worthwhile if your money went to something of value, like an IRA. Or maybe you were going to give $500 to charity, but then you do the math and realize that if you give $1000 instead, you'll get an extra $250 back on your taxes. That extra $500 donation only really costs you $250, so it's a tax write off, but it didn't really save you anything. That's an extreme example, but with a bracket, a credit or two and an itemized deduction, you might find a sweet spot.
Health expenses are deductible at a certain point. In a year when you've already had significant expenses, you may realize that you'll be able to deduct a portion on your next tax return. If your marginal tax rate was 15%, you could opt to get that laser eye surgery you've been wanting this year. It would cost you at least 15% less than if you waited until the next year. So it's a write-off, but you still have to pay the other 85%.
Business purchases could also allow for savings. For example, an LLC could sign a lease on a car and 'write it off' as a business expense. For the sake of simple numbers, say they pay a total of $25K over 3 years and this reduces their tax burden by $5K over that same period of time. The total cost to the business is $20K for 3 years. If the owner had entered into the same agreement outside the business, he/she would have spent $5K more overall. The 'write-off' didn't really help the business, but since the business and the owner are essentially the same, it was beneficial.
Sometimes, it's made to sound like tax write-offs are a simple way to get buckets of extra money or lots of free stuff. That part is nonsense. But there are real tax savings to be had by studying the deductions and credits and doing some good math. Some tax accountants specialize in minimizing tax burden and can give you some direction for your personal situation.
answered 4 hours ago
DSway
24319
I would say yes and no. I have spoken with people that don't want to pay off their home because they are getting a tax deduction on the interest. I've done the math for all of them and none of them are coming out ahead. The tax bracket reasoning is somewhat flawed because you don't pay 25% on all of your taxable income just because your marginal tax rate is 25%.
But there are times when a tax deduction could put you in a lower bracket and also allow to you get a larger child tax credit for example. That would be especially worthwhile if your money went to something of value, like an IRA. Or maybe you were going to give $500 to charity, but then you do the math and realize that if you give $1000 instead, you'll get an extra $250 back on your taxes. That extra $500 donation only really costs you $250, so it's a tax write off, but it didn't really save you anything. That's an extreme example, but with a bracket, a credit or two and an itemized deduction, you might find a sweet spot.
Health expenses are deductible at a certain point. In a year when you've already had significant expenses, you may realize that you'll be able to deduct a portion on your next tax return. If your marginal tax rate was 15%, you could opt to get that laser eye surgery you've been wanting this year. It would cost you at least 15% less than if you waited until the next year. So it's a write-off, but you still have to pay the other 85%.
Business purchases could also allow for savings. For example, an LLC could sign a lease on a car and 'write it off' as a business expense. For the sake of simple numbers, say they pay a total of $25K over 3 years and this reduces their tax burden by $5K over that same period of time. The total cost to the business is $20K for 3 years. If the owner had entered into the same agreement outside the business, he/she would have spent $5K more overall. The 'write-off' didn't really help the business, but since the business and the owner are essentially the same, it was beneficial.
Sometimes, it's made to sound like tax write-offs are a simple way to get buckets of extra money or lots of free stuff. That part is nonsense. But there are real tax savings to be had by studying the deductions and credits and doing some good math. Some tax accountants specialize in minimizing tax burden and can give you some direction for your personal situation.
answered 4 hours ago
DSway
24319
answered 4 hours ago
DSway
24319
answered 4 hours ago
DSway
24319
answered 4 hours ago
DSway
24319
24319
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
add a comment |Â
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
There are good arguments for paying off your mortgage last, and even for keeping your mortgage when accumulating other assets to reduce the risk of having all your net worth in one property, But "paying an extra 3 dollars to the bank so you can pay 1 dollar less to the IRS" is the one people seem to like.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
2
down vote
It is possible that some people may avoid additional income out of fear they may lose welfare benefits. If you currently have $30k of income and $5k of benefits, you might not want to earn an additional $3k if it would result in losing your benefits.
How common and significant welfare cliffs or poverty traps are is debated and political.
answered 5 hours ago
Charles Fox
33910
add a comment |Â
up vote
2
down vote
It is possible that some people may avoid additional income out of fear they may lose welfare benefits. If you currently have $30k of income and $5k of benefits, you might not want to earn an additional $3k if it would result in losing your benefits.
How common and significant welfare cliffs or poverty traps are is debated and political.
answered 5 hours ago
Charles Fox
33910
add a comment |Â
up vote
2
down vote
up vote
2
down vote
It is possible that some people may avoid additional income out of fear they may lose welfare benefits. If you currently have $30k of income and $5k of benefits, you might not want to earn an additional $3k if it would result in losing your benefits.
How common and significant welfare cliffs or poverty traps are is debated and political.
answered 5 hours ago
Charles Fox
33910
It is possible that some people may avoid additional income out of fear they may lose welfare benefits. If you currently have $30k of income and $5k of benefits, you might not want to earn an additional $3k if it would result in losing your benefits.
How common and significant welfare cliffs or poverty traps are is debated and political.
answered 5 hours ago
Charles Fox
33910
answered 5 hours ago
Charles Fox
33910
answered 5 hours ago
Charles Fox
33910
answered 5 hours ago
Charles Fox
33910
33910
add a comment |Â
add a comment |Â
up vote
1
down vote
People do make tax-deductible purchases (and donations) which they might not have made if it hadn't reduced their tax liability.
If nothing else, it ought to be easy to see that what might be going on is they bought (or donated) more than they would have if the deduction hadn't made it cheaper to do so. A Lexus instead of a Toyota, for example, if it's justifiable as a business expense. Just because the way they talk about it is as simple as "I bought it as a write-off" doesn't mean that there isn't a lot more nuance behind the real situation.
Consider home buyers. If mortgage interest weren't tax deductible, there are lots of people who would buy 25% less house.
answered 6 hours ago
Beanluc
32214
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
add a comment |Â
up vote
1
down vote
People do make tax-deductible purchases (and donations) which they might not have made if it hadn't reduced their tax liability.
If nothing else, it ought to be easy to see that what might be going on is they bought (or donated) more than they would have if the deduction hadn't made it cheaper to do so. A Lexus instead of a Toyota, for example, if it's justifiable as a business expense. Just because the way they talk about it is as simple as "I bought it as a write-off" doesn't mean that there isn't a lot more nuance behind the real situation.
Consider home buyers. If mortgage interest weren't tax deductible, there are lots of people who would buy 25% less house.
answered 6 hours ago
Beanluc
32214
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
add a comment |Â
up vote
1
down vote
up vote
1
down vote
People do make tax-deductible purchases (and donations) which they might not have made if it hadn't reduced their tax liability.
If nothing else, it ought to be easy to see that what might be going on is they bought (or donated) more than they would have if the deduction hadn't made it cheaper to do so. A Lexus instead of a Toyota, for example, if it's justifiable as a business expense. Just because the way they talk about it is as simple as "I bought it as a write-off" doesn't mean that there isn't a lot more nuance behind the real situation.
Consider home buyers. If mortgage interest weren't tax deductible, there are lots of people who would buy 25% less house.
answered 6 hours ago
Beanluc
32214
People do make tax-deductible purchases (and donations) which they might not have made if it hadn't reduced their tax liability.
If nothing else, it ought to be easy to see that what might be going on is they bought (or donated) more than they would have if the deduction hadn't made it cheaper to do so. A Lexus instead of a Toyota, for example, if it's justifiable as a business expense. Just because the way they talk about it is as simple as "I bought it as a write-off" doesn't mean that there isn't a lot more nuance behind the real situation.
Consider home buyers. If mortgage interest weren't tax deductible, there are lots of people who would buy 25% less house.
answered 6 hours ago
Beanluc
32214
answered 6 hours ago
Beanluc
32214
answered 6 hours ago
Beanluc
32214
answered 6 hours ago
Beanluc
32214
32214
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
add a comment |Â
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
In Australia mortgage interest is not deductible unless it is for an investment property, that doesn't stop many people from purchasing the biggest or most expensive house they can afford and borrow to their max.
– Victor
6 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
Sure - I'm saying they can afford more if there's a tax break.
– Beanluc
4 hours ago
add a comment |Â
up vote
0
down vote
No, the trope isn't "complete nonsense". Yes, people do sometimes focus solely on the tax-deduction aspect to justify purchases. Your Lebowski quote, however, seems to be talking about avoiding an additional amount of income due to the higher tax bracket.
I've heard someone say that they declined extra work because the additional pay would have bumped them into the next tax bracket, and he felt that the reduced after-tax pay for the incremental work wasn't worth the effort he'd need to put in.
Whether it's seeking a tax deduction or avoiding the next tax bracket, the psychology of the matter can't always be dismissed.
answered 5 hours ago
Lawrence
1,8031512
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
0
down vote
No, the trope isn't "complete nonsense". Yes, people do sometimes focus solely on the tax-deduction aspect to justify purchases. Your Lebowski quote, however, seems to be talking about avoiding an additional amount of income due to the higher tax bracket.
I've heard someone say that they declined extra work because the additional pay would have bumped them into the next tax bracket, and he felt that the reduced after-tax pay for the incremental work wasn't worth the effort he'd need to put in.
Whether it's seeking a tax deduction or avoiding the next tax bracket, the psychology of the matter can't always be dismissed.
answered 5 hours ago
Lawrence
1,8031512
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
0
down vote
up vote
0
down vote
No, the trope isn't "complete nonsense". Yes, people do sometimes focus solely on the tax-deduction aspect to justify purchases. Your Lebowski quote, however, seems to be talking about avoiding an additional amount of income due to the higher tax bracket.
I've heard someone say that they declined extra work because the additional pay would have bumped them into the next tax bracket, and he felt that the reduced after-tax pay for the incremental work wasn't worth the effort he'd need to put in.
Whether it's seeking a tax deduction or avoiding the next tax bracket, the psychology of the matter can't always be dismissed.
answered 5 hours ago
Lawrence
1,8031512
No, the trope isn't "complete nonsense". Yes, people do sometimes focus solely on the tax-deduction aspect to justify purchases. Your Lebowski quote, however, seems to be talking about avoiding an additional amount of income due to the higher tax bracket.
I've heard someone say that they declined extra work because the additional pay would have bumped them into the next tax bracket, and he felt that the reduced after-tax pay for the incremental work wasn't worth the effort he'd need to put in.
Whether it's seeking a tax deduction or avoiding the next tax bracket, the psychology of the matter can't always be dismissed.
answered 5 hours ago
Lawrence
1,8031512
answered 5 hours ago
Lawrence
1,8031512
answered 5 hours ago
Lawrence
1,8031512
answered 5 hours ago
Lawrence
1,8031512
1,8031512
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
add a comment |Â
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
"reduced after-tax pay" The calculation of whether increased work hours are worth the money exists at all income levels. The marginal tax rate on the money is just one consideration.
– Rupert Morrish
3 hours ago
add a comment |Â
up vote
0
down vote
The idea of buying something as a tax write-off is that the asset that you buy reduces your tax liability by more than you paid for it. They are almost always artefacts of the tax code, intended to increase investment in some category. Generally tax authorities close the loopholes as fast as they become aware of them.
The closest thing to a tax write-off that I know of is my electric bike. It cost me $2,200 and reduces my taxable income by about $1,800 per year. It's not a true tax write-off because I actually have to use it, but it's a nice bonus, on top of being quicker than driving and far easier to park. The intention, I suppose, was to drive the adoption of electric vehicles by allowing an $.81/km deduction for business use instead of the $.73/km for petrol vehicles, but there's no check that the deductions claimed don't exceed the value of the vehicle.
answered 2 hours ago
Rupert Morrish
2,7772624
add a comment |Â
up vote
0
down vote
The idea of buying something as a tax write-off is that the asset that you buy reduces your tax liability by more than you paid for it. They are almost always artefacts of the tax code, intended to increase investment in some category. Generally tax authorities close the loopholes as fast as they become aware of them.
The closest thing to a tax write-off that I know of is my electric bike. It cost me $2,200 and reduces my taxable income by about $1,800 per year. It's not a true tax write-off because I actually have to use it, but it's a nice bonus, on top of being quicker than driving and far easier to park. The intention, I suppose, was to drive the adoption of electric vehicles by allowing an $.81/km deduction for business use instead of the $.73/km for petrol vehicles, but there's no check that the deductions claimed don't exceed the value of the vehicle.
answered 2 hours ago
Rupert Morrish
2,7772624
add a comment |Â
up vote
0
down vote
up vote
0
down vote
The idea of buying something as a tax write-off is that the asset that you buy reduces your tax liability by more than you paid for it. They are almost always artefacts of the tax code, intended to increase investment in some category. Generally tax authorities close the loopholes as fast as they become aware of them.
The closest thing to a tax write-off that I know of is my electric bike. It cost me $2,200 and reduces my taxable income by about $1,800 per year. It's not a true tax write-off because I actually have to use it, but it's a nice bonus, on top of being quicker than driving and far easier to park. The intention, I suppose, was to drive the adoption of electric vehicles by allowing an $.81/km deduction for business use instead of the $.73/km for petrol vehicles, but there's no check that the deductions claimed don't exceed the value of the vehicle.
answered 2 hours ago
Rupert Morrish
2,7772624
The idea of buying something as a tax write-off is that the asset that you buy reduces your tax liability by more than you paid for it. They are almost always artefacts of the tax code, intended to increase investment in some category. Generally tax authorities close the loopholes as fast as they become aware of them.
The closest thing to a tax write-off that I know of is my electric bike. It cost me $2,200 and reduces my taxable income by about $1,800 per year. It's not a true tax write-off because I actually have to use it, but it's a nice bonus, on top of being quicker than driving and far easier to park. The intention, I suppose, was to drive the adoption of electric vehicles by allowing an $.81/km deduction for business use instead of the $.73/km for petrol vehicles, but there's no check that the deductions claimed don't exceed the value of the vehicle.
answered 2 hours ago
Rupert Morrish
2,7772624
answered 2 hours ago
Rupert Morrish
2,7772624
answered 2 hours ago
Rupert Morrish
2,7772624
answered 2 hours ago
Rupert Morrish
2,7772624
2,7772624
add a comment |Â
add a comment |Â
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Define "nonsense" - are you asking if it actually saves anyone any money ever, or, are you asking whether people are ever motivated to incur other expenses specifically to avoid paying taxes?
– Beanluc
6 hours ago
1
A lot of this trope dates back to the early '80's in the US where there were things that provided tax benefits much larger than their cost, so it was actually economic to do them. The Tax Reform Act of 1986 changed the tax code and made such maneuvers uneconomic.
– zeta-band
5 hours ago