What Is “Escrow account”?
06/01/2026
What Is an Escrow Account? An escrow account is a neutral holding area managed by a third party—usually a mortgage lender—to pay for specific property-related expenses on your behalf. It acts as a financial intermediary that collects a portion of your property taxes and insurance premiums each month to ensure those bills are paid on
What Is “Employee Stock Purchase Plan”?
06/01/2026
What Is an Employee Stock Purchase Plan (ESPP)? An Employee Stock Purchase Plan (ESPP) is a company-run program that allows participating employees to buy shares of company stock at a discounted price. Employees contribute to the plan through payroll deductions, which build up over a period of time until they are used to purchase the
What Is “Disqualifying Disposition”?
06/01/2026
What Is a Disqualifying Disposition? A disqualifying disposition occurs when you sell or trade stock acquired through an Incentive Stock Option (ISO) or an Employee Stock Purchase Plan (ESPP) before meeting specific IRS holding period requirements. When this happens, you “disqualify” yourself from favorable capital gains tax rates, and a portion of your profit is
What Is “Depreciation”?
06/01/2026
What Is Depreciation? Depreciation is a tax method used to spread the cost of a business asset over the course of its useful life. Instead of deducting the entire purchase price in the year you buy the item, you deduct a portion of that cost each year as the asset wears out, decays, or becomes
What Is “Depreciable basis”?
06/01/2026
What Is Depreciable Basis? Depreciable basis is the total dollar amount of a business asset’s cost that is eligible to be recovered through depreciation deductions. It serves as the “starting line” for calculating how much you can write off each year for the wear and tear of equipment, vehicles, or buildings. 1. Meaning of “Depreciable
What Is “Depletion”?
06/01/2026
What Is Depletion? Depletion is a tax deduction used by owners of natural resources to account for the physical reduction of those resources as they are extracted and sold. Similar to how you wear out a delivery van through use, you “use up” a mine, oil well, or timber stand as you harvest the Earth’s
What Is “Convention”?
06/01/2026
What Is a Depreciation Convention? In the world of U.S. taxes, a “convention” is a specific rule that determines when the recovery period for a business asset begins and ends. It essentially sets a standardized “start date” for your depreciation deductions, regardless of the exact day you purchased the item during the month or year.
What Is “Business-use percentage”?
06/01/2026
What Is Business-Use Percentage? The business-use percentage is the portion of time or space an asset is used for business purposes compared to its total use. It is a critical number that determines how much of a “mixed-use” expense—like a personal car or a home internet bill—you can legally deduct on your tax return. 1.
What Is “Bonus Depreciation”?
06/01/2026
What Is Bonus Depreciation? Bonus depreciation is a tax incentive that allows businesses to immediately deduct a large percentage of the purchase price of eligible assets, such as machinery or equipment, in the first year they are put to use. Instead of writing off the cost slowly over many years, this “fast-forward” button on your
What Is “Bond Premium”?
06/01/2026
What Is Bond Premium? A bond premium occurs when you purchase a bond for an amount greater than its face (par) value. This usually happens because the bond’s stated interest rate is higher than the current interest rates offered in the market, making the bond more valuable to investors. 1. Meaning of “Bond Premium” In