Lesson: Capitalizing vs. Expensing Costs

In this lesson, Nick Palazzolo, CPA, breaks down the critical difference between capitalizing and expensing costs, a topic of significance when determining taxable income and the financial health of a company. He thoroughly explains when a business should capitalize a cost, adding it to an asset's value, and when to expense it, therefore realizing the cost immediately in the income statement. Nick particularly emphasizes the implications for both book and tax purposes, with an eye toward strategic tax benefits. Moreover, he delves into specific exceptions to general capitalization rules and introduces the de minimis safe harbor provision, illustrating each concept with practical examples. This detailed walkthrough is designed to master the nuances of tax and accounting treatments for various business expenses.