Skip to main content

What is the difference between capital and current expenses?

Chicago, IL |

Mainly, I am not too clear on capital and current expenses. What is the difference of the two?


+ Read More

Attorney answers 1


Are you asking for tax purposes or as a general matter of accounting? In general, a capital expenditure is a cost you incur to create or purchase a long-lived asset, such as a car, or a computer, or a piece of machinery used in the trade or business. An expense, on the other hand, is, generally speaking, a cost incurred as part of doing business that doesn't create or provide a long-lived asset. A good example is paying the janitor for sweeping up; all you get from that is a clean floor, which will most likely be dirty again within a week's time.

There are a lot of areas where the distinction is not nearly so clear; for those matters you should be consulting an accountant or a CPA.

My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not constitute an attorney/client relationship or an offer to form such a relationship. This disclaimer is intended to be fully compliant with the requirements of Treasury Department Circular 230 and the terms thereof are fully incorporated by reference. If you wish to consult with me please contact me at dwatchley@newyorktaxcounsel or visit my website at

Jonathan Paul Decatorsmith

Jonathan Paul Decatorsmith


Nice, concise answer. I just want to emphasize that the practical consequence for most taxpayers is that "expenses" are generally currently deductible in full on the annual tax return, as opposed to having to be spread over future tax years ("capitalized") - normally not as advantageous. Please note that my answer and/or comments do not constitute legal advice and may not be relied upon for that any purpose - please consult a tax professional to address your specific situation!