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Tax Expenditure Glossary
- AMORTIZATION:
- Annual deduction allowed for
the gradual exhaustion or obsolescence of intangible assets having a limited
useful life which are used in the production of income, such as patents and
copyrights; analogous to depreciation of tangible assets.
- CAPITAL EXPENDITURE:
- An expenditure made in
acquiring, adding to or bettering a fixed asset. For accounting purposes,
capital expenditures are not charged against current revenue. They are added
to capital account or "capitalized" and then may be depreciated;
amortized, or recovered when a business is sold. This concept should be
distinguished from an expense.
- CREDIT:
- Amount by which a taxpayer
is allowed to reduce a tax liability, as computed by applying the tax rates
to the tax base, to be distinguished from a deduction from the tax base.
- DEDUCTION:
- Amount that a taxpayer is
allowed to subtract from the gross tax base.
- DEPRECIATION:
- Annual deduction allowed for
the gradual exhaustion or obsolescence of tangible property used in the
production of income.
- EXCLUSION:
- The legal elimination from
the tax base of items recognized as falling within its definition. The
federal term for what is sometimes called an exemption for Massachusetts.
(See below.)
- EXEMPTION:
- The legal elimination from
the tax base of items or transactions recognized as falling within its
definition, or of taxable units that would normally be subject to tax.
- EXPENSE:
- A revenue expenditure or
cost, which, for accounting purposes, is charged against current revenue. To
be distinguished from a capital expenditure.
- GROSS INCOME:
- The total of all items
included in the concept of income that a taxpayer receives during the taxable
period.
- NET INCOME:
- Amount remaining after
subtracting exempt income and deductions from gross income.
- PERSONAL EXEMPTION:
- A specific amount or
percentage of net income on which the tax rate is zero. To be distinguished
from an exemption as defined above, which applies to a class of income or
taxpayers. Sometimes called an "allowance".
- TAXABLE INCOME:
- Amount to which the tax
rates are applied in computing tax liability, after subtracting personal exemptions
from net income.
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