<P> In income tax calculation, a write - off is the itemized deduction of an item's value from a person's taxable income . Thus, if a person in the United States has a taxable income of $50,000 per year, a $100 telephone for business use would lower the taxable income to $49,900 . If that person is in a 25% tax bracket, the tax due would be lowered by $25 . Thus the net cost of the telephone is $75 instead of $100 . </P> <P> In business accounting, the term write - off is used to refer to an investment (such as a purchase of sellable goods) for which a return on the investment is now impossible or unlikely . The item's potential return is thus canceled and removed from ("written off") the business's balance sheet . Common write - offs in retail include spoiled and damaged goods . In commercial or industrial settings, a productive asset may be subject to write - off if it suffers failure or accident damage that is infeasible to repair, leaving the asset unusable for its intended purpose . </P> <P> Similarly, banks write off bad debt that is declared non collectable (such as a loan on a defunct business, or a credit card due that is in default), removing it from their balance sheets . A reduction in the value of an asset or earnings by the amount of an expense or loss . Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues . </P> <P> A negative write - off refers to the decision not to pay back an individual or organization that has overpaid on an account . Negative write - offs can sometimes be seen as fraudulent activity if those who overpay a claim or bill are not informed that they have overpaid and are not given any chance to reconcile their overpayment or be refunded . </P>

When does a bank write off a loan
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