Video: Introduction to Cost Recovery

In this lesson, Nick Palazzolo, CPA, demystifies the concept of cost recovery, providing a clear explanation of how it differs from actual monetary reimbursement. He dives into the mechanics of how businesses and individuals can recoup the cost of their investments in both tangible and intangible assets, emphasizing the use of tax deductions such as depreciation for physical assets and amortization for intangible ones. Further clarifying the methodology, Nick highlights the Modified Accelerated Cost Recovery System (MACRS) utilized for tax purposes and contrasts it with accounting methods like straight-line and double-declining balance. He ensures a foundational understanding of the depreciation and amortization schedules, discusses the implications on taxable income, and nuances such as non-depreciable assets and statutory limitations. The introduction is designed to set the stage for a comprehensive analysis and application of cost recovery on the CPA exam.