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Monday, May 1, 2017

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





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