Brief Definition
Tax deductibility of goodwill refers to the ability to write off the cost of goodwill as an expense for tax purposes over a period of time.
Further Explanation
Tax deductibility of goodwill refers to the ability to write off the cost of goodwill as an expense for tax purposes over a period of time. Goodwill is an intangible asset that arises when one company acquires another for more than the fair value of its net identifiable assets. In many jurisdictions, including the U.S., the cost of goodwill can be amortized and deducted over a set period, usually 15 years. This deduction helps reduce the taxable income of the acquiring company, thereby lowering its tax liability.
Example:
Tax deductibility of goodwill refers to the ability to write off the cost of goodwill as an expense for tax purposes over a period of time. Goodwill is an intangible asset that arises when one company acquires another for more than the fair value of its net identifiable assets. In many jurisdictions, including the U.S., the cost of goodwill can be amortized and deducted over a set period, usually 15 years. This deduction helps reduce the taxable income of the acquiring company, thereby lowering its tax liability.