Your Ask Joey ™ Answer

Does depreciation expense result a temporary or permanent tax difference?

Depreciation expense results in a temporary difference since the amount of depreciation expense recorded in a given year can vary based on U.S. GAAP and IRS tax rules. The difference is temporary because eventually the asset is fully depreciated and 100% of the depreciation for a specific asset is recognized under both U.S. GAAP and IRS tax rules.

Back To All Questions

You might also be interested in...

  • Is tax-exempt interest a permanent or temporary difference?

    Differences that result from interest income being earned from an investment made in state or municipal bonds. represents a permanent difference. These income items will be included in calculating pretax income for financial statement net income but will be excluded for calculating taxable income. That means that this is an example of a permanent difference.

  • What is a temporary difference in tax accounting?

    Temporary differences are differences that will be recognized for book in one period and tax in another period. Eventually these differences will balance out and there will not be a difference in the future. Examples will include: A) Expenses or losses deducted either before or after they have been deducted from book income. B) Revenues...