Amortization Expense

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

2-Date Acquired

3-Date Purchased

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.

 

This article was written by Donald M. Scherzi, CPA, CFP, LLC

Mike Lupo, SCORE Counselor

Visit us at: www.scoresouthflorida.net