Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

What are intangible assets?

intangible assets, tax, accountingBy definition, intangible assets consist of items that are not tangible. In other words, these items are not able to be touched or seen even though money may have been paid to purchase them. Some common examples include:

  • Goodwill
  • Patents
  • Copyrights
  • Trademarks
  • Organization Costs
  • Loan Fees

Intangible assets can be developed over a period of time by building up customer lists, by investing money into them or they can be purchased from another individual or entity.

For tax purposes, intangible assets generally need to be amortized over a specified period of time, depending on the type of asset or life of the asset. They can not be deducted immediately because a business receives benefits from them for more time than just the current year. Goodwill, patents, copyrights and trademarks are amortized over 15 years. The first $5,000 of organization costs can be deducted currently as start up expenses, but the rest must be amortized over 15 years.  If the organization costs are over $50,000, then the $5,000 available current deduction is reduced dollar for dollar. Loan fees are amortized over the life of the loan.

Intangible assets are generally shown in the other asset section of a balance sheet as one of the last items. The reason for their position on the balance sheet is they are not as liquid as many other balance sheet items and therefore, are not easily transferable to someone else in a short amount of time.

In summary, intangible assets are not the general population’s definition of an asset, but they can be very valuable, so it is important to account for them properly.