The tax laws offer new and existing businesses the opportunity to deduct amortization expense on various intangible assets acquired and used for business purposes.
Common intangible assets include: Business Start-Up Costs, Business Organization Costs, Copyrights, Customer Lists, Franchise Agreements, Goodwill, Licensing Agreements, Non-compete Agreements, Patents, Trademarks/names, and Trade Secrets (Formulas and Recipes).
In order to compute the correct amount of amortization each year, the following records need to be maintained:
1-Description of the asset
4-Total Purchase Amount
5-Date Placed In Service for Business Use (If different form date acquired)
6-Business Use Percentage (if less than 100%)
IRS Publication 535 provides detailed information on intangible assets and amortization and is available for Free form the IRS by calling 800-829-3676.
The laws have specific rules for the various types of intangible assets which must be followed each year.
Amortization expense is thus a deductible business expense that helps a business owner reduce income taxes each year.
Mike Lupo, SCORE Counselor
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