Amortization

Amortization

The repayment of a loan by installments.

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Amortization. Amortization is the gradual repayment of a debt over a period of time, such as monthly payments on a mortgage loan or credit card balance.

To amortize a loan, your payments must be large enough to pay not only the interest that has accrued but also to reduce the principal you owe. The word amortize itself tells the story, since it means "to bring to death."

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Amortization

The deduction of certain capital expenses over a fixed period of time. Amortization generally is claimed on Form 4562. Amortizable expenses include business start-up expenses, qualified forestation or reforestation costs, section 197 expenses (goodwill, going-concern value, covenants not to compete, franchises, trademarks, trade names, and other specified items), intangible drilling costs, mining and exploration expenses, research and experimental expenses, and the cost of getting a lease. Amortizable expenses not claimed on Form 4562 include amortizable bond premiums of an individual taxpayer and points paid on a mortgage if the points cannot be currently deducted.