Governor Charles D. Baker's Budget Recommendation - House 2 Fiscal Year 2017

Tax Expenditure Appendix B - 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 Exemption.)
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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