Income Tax Basis

Income Tax Basis Definition (in the Accounting Vocabulary)

The New York State Society of Certified Public Accountants offers the following definition of Income Tax Basis in a way that is easy for anybody to understand: (1) For tax purposes, the concept of basis determines the proper amount of gain to report when an ASSET is sold. Basis is generally the cost paid for an asset plus the amounts paid to improve the asset less deductions taken against the asset, such as DEPRECIATION and AMORTIZATION. (2) For accounting purposes, a consistent basis of accounting that uses income tax accounting rules while GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) does not.