How Do Advertising Deductions Work?

[Process]

I’ve run into a few people who write off their ads. One client off mine says he writes ads off 100%. This was surprising, I thought most deductions are only 20-30%..

Many people don’t Know this at all it seems. some sources say Ads are a 100% write off.

• What Business Expenses Are Tax Deductible?
• View: https://m.youtube.com/watch?v=Grhbc9s578g

One would think Cardone would be in deep shit given how high profile he is.

what is the truth?

 

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[Process]

No tax experts here who can chime in?

(I don’t trust internet blogs and gurus)

 

[Johnny boy]

Here Are 10 Common Small Business Tax Deductions

There are small business expenses you can deduct to cut your taxes, including travel, professional fees, interest, and insurance. Learn more about these deductions.

www.thebalancesmb.com

"Whether you call it advertising, marketing or promotion, you can deduct expenses that help you bring in new customers and keep existing clientele."

 

[Rabby]

Advertising is just an expense, like payroll or manufacturing costs. Assuming you're talking about income tax deductions, why would you be taxed on any expense, advertising or otherwise? Expenses are not taxable income. Taxable income is generally what's left of your business income after the necessary costs of business are paid.

A few things have limitations, at least in some jurisdictions, such as meal expenses that you would personally have whether or not you had a business. But if you had no business, would advertising costs be part of your cost of living, like food and water?

 

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[Process]

Advertising is just an expense, like payroll or manufacturing costs. Assuming you're talking about income tax deductions, why would you be taxed on any expense, advertising or otherwise? Expenses are not taxable income. Taxable income is generally what's left of your business income after the necessary costs of business are paid.

A few things have limitations, at least in some jurisdictions, such as meal expenses that you would personally have whether or not you had a business. But if you had no business, would advertising costs be part of your cost of living, like food and water?

@Rabby so can someone use ad budgets as a tax write off?

As in they owed let’s say 50k in taxes on profit of 150k, if they spend 40k or something does that deduct from? I’ve heard from some they deduct that 40k and pay the 10k in tax. I’m curious if that is legit or not.


@Johnny boy I’ve read that source too, I never trust anything from a single blog. I’m hoping to hear from entrepreneurs in this forum how much they write off.

also I’m hoping to hear from a few tax accountants/experts. I have a meeting with my tax guy next week.

 

[MitchC]

150k
50k tax is 33%

what you do is take 40k away from 150k
110k
33%
roughly 33.33k tax instead of 50k.

Income 150k
Expenses 40k
Net profit 110k
33% tax 33k

 

[Johnny boy]

I write off 100% of marketing and advertising. Everything I spend on the business is a 100% write off except for stuff like food which is like 50% or something like that.

 

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[biophase]

I’ve run into a few people who write off their ads. One client off mine says he writes ads off 100%.

Yes, it's an expense.

 

[Process]

@biophase and @Johnny boy

Ok cool thank you guys, that is what I was curious about!

 

[Rabby]

@Rabby so can someone use ad budgets as a tax write off?

As in they owed let’s say 50k in taxes on profit of 150k, if they spend 40k or something does that deduct from? I’ve heard from some they deduct that 40k and pay the 10k in tax. I’m curious if that is legit or not.


@Johnny boy I’ve read that source too, I never trust anything from a single blog. I’m hoping to hear from entrepreneurs in this forum how much they write off.

also I’m hoping to hear from a few tax accountants/experts. I have a meeting with my tax guy next week.

The thing to understand is that your advertising costs are deducted from your gross income, not from your tax liability. This is true of all "tax deductions" ... it's how they work.

So if your business income was $150,000, and you had 40k in advertising expenses, 20k in payroll expenses, and 80k in product costs, you would have:
Gross income: 150,000
Expenses: 140,000
Net (taxable) income: 10,000

Your tax liability would be your tax rate times the $10,000.

There are a few things that may result in tax credits rather than deductions. Advertising is not one of those things. Tax credits, unlike deductions, are subtracted from your tax liability.

 

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