When a company purchases something, it can expense (deduct the cost) from its taxable income. In other words, if your company made $100,000 this year but spent $10,000 on equipment, you can deduct that $10,000 and are only taxed on $90,000 of income.
Traditionally, though, you can’t deduct the full cost right away. Instead, you spread the deduction over time. For example, if you buy a machine expected to last 5 years, you might deduct 20% of the cost each year for those 5 years.
It’s more beneficial to deduct the full cost in the year you purchase it, because you get the tax benefit sooner. That’s what is referred to as “full expensing.”
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When a company purchases something, it can expense (deduct the cost) from its taxable income. In other words, if your company made $100,000 this year but spent $10,000 on equipment, you can deduct that $10,000 and are only taxed on $90,000 of income.
Traditionally, though, you can’t deduct the full cost right away. Instead, you spread the deduction over time. For example, if you buy a machine expected to last 5 years, you might deduct 20% of the cost each year for those 5 years.
It’s more beneficial to deduct the full cost in the year you purchase it, because you get the tax benefit sooner. That’s what is referred to as “full expensing.”