Items that Must be Amortized

Tax law designates specific types of capital expenditures that must be amortized over a prescribed number of years. The annual amortization amount is simply the cost of the item divided by the number of years in the amortization period.

The following expenditures must be amortized:

  • Section 197 Intangibles (amortize over 15 years).
    • These are intangible assets acquired in connection with the acquisition of a business.
  • Business start-up costs and organizational costs (amortize over 5 years)
  • Construction period interest and taxes
  • Research and experimentation costs
  • Bond premiums
  • Reforestation costs
  • Pollution control facilities
  • Costs of acquiring a lease

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