In tax terminology, what is an “intangible asset?” One way of looking at intangibles is, they are business assets that cannot be physically touched. That’s a little misleading because sometimes the intangible might exist in a physical form.
Here’s a partial list of what IRS Publication 535 defines as intangible assets:
- Goodwill
- Customer lists
- Patents, copyrights, formulas, designs, etc.
- Franchises, trademarks and trade names
For the full list, see pages 28-29 of Publication 535.
Intangible assets cannot be depreciated, but most intangibles can be amortized over 15 years.
I wrote more about the topic of amortization and franchise agreements in this post. In that particular situation, a client had taken on a 5-year franchise agreement, but the cost of obtaining that agreement had to be amortized over 15 years on the client’s tax return.
For more tax terms in (hopefully) simplified explanations, visit the Glossary page on this website.