Write-offs (Income Tax Write-off) Updated 4/24/02
Apr 16 '02 (Updated Apr 26 '03)
The Bottom Line A Write-Off is a collection of related reviews on Epinions -- Never Mind -- A write-off is something that can be written off on your taxes. Four examples given here.
A Write-Off is a collection of reviews on Epinions with a common theme and a web page on which the participants and their reviews are listed.
Oh, you wanted the tax definition. Never Mind.
Actually, this review is part of the 2002 Tax Write-Off, so it fits both definitions. Participants include laura10801, jro26, jo.com, Bryan_Carey, and mrisch. Other review links can be found here.
I don't think the word "Write-Off" actually occurs in the tax code, but there are 4 provisions of the code which might qualify.
Section 179 (See publication 946 (or 534 for rules before 1987) for more information.)
Section 179 allows tangible personal property(1), acquired for business use(2), acquired by purchase(3), and not excluded(4), otherwise depreciable (see my review on Depreciation),to be deducted in full, subject to additional limits.
(1) Tangible personal property is any tangible property (excluding intellectual property (copyrights, trademarks, patents, etc.) and computer software) which is not real property (excluding buildings, permanent fixtures to buildings, and land). Some structures used in transportation, communications, electricity, gas, water, sewage disposal, agricultural or horticultural use, or distributing petroleum products are specifically included.
(2) This means that investment property, rental property (unless renting property is your business), and property that producing royalties are excluded. Also, the business use of the property must be at least 50%. (Only the business percentage can be written off.)
(3) This excludes inherited property, trade-ins, and property purchased from "related persons".
(4) This probably won't affect you.
The deduction is limited to a certain dollar amount ($24,000 for 2001 and 2002), reduced if the total property eligible for section 179 treatment exceeds another dollar amount ($200,000 for 2001 and 2002).
The deduction is also limited by the total business income (which includes wages and salaries). If the deduction is limited by this provision, then the excess can be carried over to future years (not subject to future $24,000 limits, but subject to this limit), until the property is no longer used in the business.
If business use decreases during the recovery period (see my review on Depreciation), the deduction must be recaptured on form 4797.
You must make the election to use section 179 on either an original tax return (whether or not timely), an amended return filed by the due date including extensions, or on an amended return filed within 6 months of the due date of a timely filed return (excluding extensions) which does not claim the election. (This last is a special situation, requiring specific wording on the amended return.)
The section 179 deduction is claimed on form 4562, like normal (or accelerated) depreciation.
New 9/11 deduction
This is so new that you can't actually claim it yet. It will be claimed on form 4562, like normal (or accelerated) depreciation. It's an additional 30% write-off for depreciable property put into service from 9/12/01 to 9/11/02. The remaining 70% is depreciated normally, possibly including a section 179 deduction. I'll rewrite this section to include more details when they become officially available. I mean, the law passed last month, but the IRS has neither written the regulations nor amended the forms.
Update 4/24/02: The new form 4562 and instructions came out a few days ago. I made a mistake in the last paragraph, but I decided to leave it, complete with errors, intact. The error I made is that the section 179 deduction is taken first, before considering this deduction.
In general, eligible property is any tangible property with a recovery period of 20 years or less, or 25 year water utility property, or computer software. Exclusions include listed property used less than 50% for business use, and any property required to be depreciated using the AMT tax tables.
You can elect to exclude any "class" of property from this additional depreciation. Instructions for doing so state to attach a statement to your return. ("Class" must be defined elsewhere.)
There are additional allowances, both for section 179, and for this section, for New York Liberty Zone property first purchased and put into service after September 10, 2001. The instructions refer directly to the tax code for more detail, which suggests to me that the regulations still haven't been written.
End Update
Non-business bad debt write-off
In the year a non-business bad debt becomes worthless, you can write off the amount as a short-term capital loss. If you find the debt was worthless in a previous year, you can go back up to 7 years and amend that year's return to claim the loss. If it was worthless more than 7 years ago, you've lost the deduction.
Worthless property capital loss deduction
In the year a capital asset (one whose sale would produce capital gain or loss) becomes worthless, you can declare it to be sold for $0. (As I write this, for example, Enron stock is not yet worthless. It may become worthless when the bankruptcy is closed).
References
http://www.epinions.com/content_2493161604 on Capital Loss
http://www.epinions.com/content_2610471044 on Depreciation
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Epinions.com ID:
Arthur.Rubin
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Member: Arthur Rubin
Location: Brea, CA, USA
Reviews written: 97
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About Me:
Expert in mathematics, computers, income tax, with a wide variety of interests.
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