Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2012

Governor's Budget Recommendation FY 2012

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.

top of page link top of page