Expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often referred to as an expense. An expense is a cost that is "paid" or "remitted", usually in exchange for something of value. Something that seems to cost a great deal is "expensive". Something that seems to cost little is "inexpensive". "Expenses of the table" are expenses of dining, refreshments, a feast, etc.
Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and credits. The difference between deductions, exemptions and credits is that deductions and exemptions both reduce taxable income, while credits reduce tax.
A company's earnings before interest, taxes, depreciation, and amortization is an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation, and amortization are subtracted, as a proxy for a company's current operating profitability.
Capital expenditure or capital expense is the money a company spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof.
The schedular system of taxation is the system of how the charge to United Kingdom corporation tax is applied. It also applied to United Kingdom income tax before legislation was rewritten by the Tax Law Rewrite Project. Similar systems apply in other jurisdictions that are or were closely related to the United Kingdom, such as Ireland and Jersey.
The Modified Accelerated Cost Recovery System (MACRS) is the current tax depreciation system in the United States. Under this system, the capitalized cost (basis) of tangible property is recovered over a specified life by annual deductions for depreciation. The lives are specified broadly in the Internal Revenue Code. The Internal Revenue Service (IRS) publishes detailed tables of lives by classes of assets. The deduction for depreciation is computed under one of two methods at the election of the taxpayer, with limitations. See IRS Publication 946 for a 120-page guide to MACRS.
Section 179 of the United States Internal Revenue Code, allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated. This property is generally limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business. Buildings were not eligible for section 179 deductions prior to the passage of the Small Business Jobs Act of 2010; however, qualified real property may be deducted now.
Faux frais of production is a concept used by classical political economists and by Karl Marx in his critique of political economy. It refers to "incidental operating expenses" incurred in the productive investment of capital, which do not themselves add new value to output. In Marx's social accounting, the faux frais are a component of constant capital, or alternately are funded by a fraction of the new surplus value.
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For financial accounting purposes, accelerated depreciation is expected to be much more productive during its early years, so that depreciation expense will more accurately represent how much of an asset’s usefulness is being used up each year. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets.
Depreciation recapture is the USA Internal Revenue Service (IRS) procedure for collecting income tax on a gain realized by a taxpayer when the taxpayer disposes of an asset that had previously provided an offset to ordinary income for the taxpayer through depreciation. In other words, because the IRS allows a taxpayer to deduct the depreciation of an asset from the taxpayer’s ordinary income, the taxpayer has to report any gain from the disposal of the asset as ordinary income, not as a capital gain.
Under the U.S. tax code, businesses expenditures can be deducted from the total taxable income when filing income taxes if a taxpayer can show the funds were used for business-related activities, not personal or capital expenses. Capital expenditures either create cost basis or add to a preexisting cost basis and cannot be deducted in the year the taxpayer pays or incurs the expenditure.
Generally, expenses related to the carrying-on of a business or trade are deductible from a United States taxpayer's adjusted gross income. For many taxpayers, this means that expenses related to seeking new employment, including some relevant expenses incurred for the taxpayer's education, can be deducted, resulting in a tax break, as long as certain criteria are met.
Commissioner v. Idaho Power Co., 418 U.S. 1 (1974), was a United States Supreme Court case.
Simon v. Commissioner, 68 F.3d 41, was a decision by the Second Circuit of the United States Court of Appeals relating to the deductibility of expensive items or tools that may increase in value as a collectible but decrease in value if used in the course of a business or trade.
The Repair Allowance Method, also known as the Repair Allowance Safe Harbor, is a proposed regulation to the Internal Revenue Service administrative regulations. This optional method of calculating deductions affects individuals and corporate taxpayers who own property subject to MACRS and repair or improve property used in a trade or business. This method permits taxpayers to treat both material and labor cost used to repair or improve property as a trade or business expense. Therefore, taxpayers who elect this method may deduct this cost as an above the line deduction under 26 CFR §. 162. This method is a proposed simplification, when compared to other deduction methods, because it does not distinguish between repair and improvement of property. Without the proposed regulation, improvements to property must be capitalized and not expensed because improvements are considered a capital expenditure. Arguably, this proposed regulation would not be used by a taxpayer who has a clearly defined business expense otherwise deductible under IRC §. 162. And even California adopts the PRA
Selig v. United States, 740 F.2d 572, is a case decided by the United States Court of Appeals for the Seventh Circuit related to the amortization of intangible property.
Section 280F was enacted to limit certain deductions on depreciable assets. Section 280F is a policy that makes the Internal Revenue Code more accurate by allowing a taxpayer to report their business use on an asset they may also need for some personal reasons.
The oil depletion allowance in American (US) tax law is an allowance claimable by anyone with an economic interest in a mineral deposit or standing timber. The principle is that the asset is a capital investment that is a wasting asset, and therefore depreciation can reasonably be offset against income.
