Tax Expense

Definition

A company’s tax expense, or tax charge, is the income before tax multiplied by the appropriate tax rate. Generally, companies report income before tax to their shareholder under generally accepted accounting principles. However, companies report income before tax to their government under tax law.


Tax Expense

What is a ‘Tax Expense’

A tax expense is a liability owing to federal, state/provincial and municipal governments. Tax expenses are calculated by multiplying the appropriate tax rate of an individual or business by their income before taxes, after factoring in such variables as non-deductible items, tax assets and tax liabilities.

Explaining ‘Tax Expense’

Determining the appropriate tax rate and identifying the correct accounting methods for items affecting one’s tax expense are carefully described by tax authorities such as the IRS and GAAP/IFRS.

Further Reading