An intermediate step in calculating taxable income, AGI is the amount used for computing deductions based on, or limited by, a percentage of income, such as medical expenses, charitable contributions, and miscellaneous itemized deductions. This amount is determined by subtracting from gross income any business expenses and other deductions, such as KEOGH payments, alimony payments, and IRA contributions.
A capital allowance introduced in April 2008 that enables businesses to offset 100% of their capital expenditure in any one year against corporation tax, up to a specified limit. The allowance is available to businesses of any size or legal form and cannot be claimed on non-commercial motor vehicles.
Carriage outwards refers to the delivery costs incurred when a business sends goods to customers. These costs are accounted for as an expense in the profit and loss account.
A company car is a vehicle owned by a business but made available for employees to use for business and, in some cases, personal purposes.
Contributions in the context of finance and taxation refer to payments made by individuals or businesses, either for charitable purposes or as required unemployment taxes. Understanding the implications of these contributions is crucial for effective financial planning.
Direct expenses are expenditures that are directly attributable to the production of a particular cost unit, excluding direct labor and materials.
Entertainment expenses and business meals are deductible only if they are 'directly related to' or 'associated with' the active conduct of a taxpayer's trade or business. These expenses are deductible to the extent of 50% of cost, excluding any lavish or extravagant costs.
A fixed cost is a type of business expense that is constant and does not fluctuate with changes in the level of goods or services produced. These costs are incurred regularly, regardless of the business's activity level.
In the operation of a business, fixed expenses are those that remain constant regardless of production or sales levels. These are crucial for budgeting and financial planning, and they contrast with variable expenses, which fluctuate with the level of production or sales.
Formation expenses pertain to the costs incurred in establishing a company. As mandated by the Companies Act, they should not be recorded as an asset of the company.
Insurance premiums are the amounts paid to an insurance company to cover potential hazards. These payments can have tax implications and differ in deductibility based on whether they are made by businesses or individuals.
Labour costs refer to the total expenditure on wages paid to workers who are directly or indirectly involved in the production of a product, service, or cost unit. This includes both direct and indirect labour costs.
The Loss Denial Rule, often referred to in tax contexts, precludes taxpayers from claiming deductions for expenses or losses associated with activities not engaged in for profit, commonly referenced as 'hobby losses.'
Luxury automobiles are four-wheeled vehicles used on public streets and highways with an unloaded gross weight of 6,000 pounds or less. Depreciation deductions for such vehicles are severely limited for income tax purposes.
Managed costs are specific expenses that a company can control or influence through internal decisions, strategic planning, and efficient resource management. Careful handling of managed costs can significantly impact a company's operational efficiency and overall profitability.
Operating expenses refer to the amount paid to maintain a property or run a business, including costs such as property taxes, utilities, and hazard insurance. It excludes financing expenses, depreciation, and income taxes.
A tax term that allows a current deduction for business expenses; contrasted with capital expenditures. An ordinary and necessary business expense of a sole proprietor would appear on Schedule C of Form 1040.
Out-of-pocket costs refer to the additional expenses that a company or individual will have to pay as a direct result of a specific business decision. These costs can play a crucial role in decision-making, especially in scenarios where cash resources are limited.
Out-of-pocket expenses are expenditures from an individual's personal financial resources, often for business or personal uses. Common examples include unreimbursed costs for supplies, travel, and services.
Overhead costs are indirect expenses that are not directly tied to a specific product or service but are necessary for the overall operations of an organization.
Overhead costs refer to ongoing business expenses not directly attributed to creating a product or service. These costs help businesses operate and maintain their daily functions.
Overheads, also known as burden in the USA, refer to the ongoing business expenses not directly attributed to creating a product or service. Understanding overheads is crucial for accurate financial reporting and cost management.
Payroll is the aggregate periodic amount a business pays its workers and a list of employees along with their compensation.
Period costs are expenses that are incurred over a specific period of time and are not directly tied to a specific product or production activity. These costs are typically fixed, such as rent, insurance, and business rates.
A principal place of business refers to the primary location where an individual conducts the administrative or management activities of a trade or business. It is a key criterion for determining if a home office is tax-deductible.
Schedule C is a tax form used by individuals to report income and expenses from a business or self-employed activity.
SG&A expenses are essential for the daily operations of a business but do not include production costs. These expenses are tracked on a company's profit and loss statement and cover a variety of areas such as sales salaries, advertising, office expenses, and more.
Expenditures incurred for promoting and marketing interests, which are capitalized as an intangible asset (and not deductible or amortizable).
A tax-deductible expense can be used to reduce taxable income, resulting in a lower tax liability. Common examples include interest on housing, ad valorem taxes, depreciation, repairs, maintenance, utilities, and other ordinary and necessary business expenses.
A tax shield refers to allowable deductions that reduce a taxpayer's taxable income, thereby decreasing the amount of tax owed.
Denoting an amount that can be deducted from income or profits, in accordance with the tax legislation, before establishing the amount of income or profits that is subject to tax.
A derisive term for lavish lunches characterized by having three martinis and claimed as tax-deductible business expenses. The three-martini lunch became a symbol for business extravagance and resulted in 1993 tax act provisions making only 50% of the cost of business meals deductible for tax purposes.
Travel and Entertainment (T&E) expenses are ordinary and necessary expenses incurred while traveling away from home for business purposes, subject to specific tax regulations.
