Starting Your Business/Keeping Tax Records

What are Business Expenses

Patents/Copyrights/Agreements Not to Compete

Intangible property is property that has value but cannot be seen or touched.

Generally, you can either amortize or depreciate intangible property. You must amortize certain intangible property over 15 years if you meet the following conditions.

• You acquired the property after August 10,1993, (after July 25, 1991, if elected).
• You use the property in connection with a business or for the production of income.

If you meet these conditions, amortize the following intangibles.

1. Patents and copyrights.
2. Customer or subscription lists, location contracts, and insurance expirations.
3. Designs and patterns.
4. Franchises.
5. Agreements not to compete.

Caution: If you created any of the intangibles listed in items (1) through (3), you can amortize them only if you created them in connection with the acquisition of assets constituting a trade or business or a substantial part of a trade or business.

For more information on amortization, see chapter 9 in Publication 535. 

Agreement not to compete

Important References

Publication 946                       How to Depreciate Property
Form 4562                               Depreciation and Amortization
Publication 535                       Business Expenses
Instructions for Form 4562