The Olympics are well under way and so is tax season! Have you ever wondered what the Olympics and accounting have in common? If we’re being honest, probably not. But, lucky for you, we’re here to show you how the two are related.
If you want to win the gold in curling, you have to win the gold in your accounting, as well. If you are an ice skater, that is your job, so your skate are tax deductible! Same with every other professional sport, as well.
The term “tax deduction” is commonly used in the accounting world, but do you actually know what it means? You might somewhat understand but it may be a little foggy, so we’ll break it down for you. The technical definition is a reduction in income that can be taxed and is usually a result of expenses. Tax deductions are removed from the taxable income and lowers a person’s tax liability.
Great, but what does that mean?
If you make an expense for your business (like a professional snowboarder buying themselves new snowboarding boots), this expense is removed from your taxable income and you will not be taxed on it. This means less money is being taken from you in the form of taxes. Make sense?
In terms of the winter Olympics, if a speed skater needs new blades for their skates, they can deduct this from their taxable income and they will not lose money because this expense was for their “business.” A service is also a business. Professionals in the Olympics offer a service, so the supplies and tools they utilize to do their jobs are tax deductible!
In even more common terms: you will not be taxed for buying something that is for your business. This means less money is taxed from your income! This means you get more of the money you earned!
Once you figure out how to benefit from tax deductions, your accounting will win you a gold medal.