Promotion Expense

A A A

DEFINITION

A cost that a business incurs to make its products or services better known to consumers, usually in the form of giveaways. The IRS considers promotion expenses to be tax-deductible as business expenses, provided they are ordinary and necessary. When writing off promotion expenses on their tax returns, companies should take care to ensure that these expenses would not more accurately be classified as advertising expenses or charitable contributions.

INVESTOPEDIA EXPLAINS

If a tax software company mailed out CDs containing a free version its federal tax preparation software to thousands of households in the hopes of selling its corresponding state tax preparation software, it could deduct the costs of the CDs and their packaging as promotion expenses. Similarly, if a lawn-care company offered a free front-yard mowing to every house in a neighborhood in the hopes of earning new customers, it could probably deduct its costs to perform this service as promotional expenses.


RELATED TERMS
  1. Business-To-Business Advertising

    Marketing efforts directed toward other businesses rather to individual consumers. ...
  2. Marketing Campaign

    Specific activities designed to promote a product, service or business. A marketing ...
  3. Promotion

    1.In terms of a career, a promotion refers to the advancement of an employee's ...
  4. Tax Deduction

    A deduction from gross income that arises due to various types of expenses incurred ...
  5. Viral Marketing

    Internet advertising or marketing that spreads exponentially whenever a new ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable ...
  7. Brand Awareness

    The likelihood that consumers recognize the existence and availability of a ...
  8. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding share of common ...
  9. Billing Cycle

    The interval of time during which bills are prepared for goods and services ...
  10. Corporate Credit Rating

    The opinion of an independent agency regarding the likelihood that a corporation ...
Related Articles
  1. How To Target Ideal Customers
    Professionals

    How To Target Ideal Customers

  2. Advertising, Crocodiles And Moats
    Professionals

    Advertising, Crocodiles And Moats

  3. The Lucrative World Of Third-Party Marketing
    Professionals

    The Lucrative World Of Third-Party Marketing

  4. An Introduction To The CMA Designation
    Professionals

    An Introduction To The CMA Designation

  5. Top 4 Most Competitive Financial Careers
    Professionals

    Top 4 Most Competitive Financial Careers

  6. Operating Profit
    Investing

    Operating Profit

  7. Current Assets
    Investing Basics

    Current Assets

  8. How Doing Your 'Share' Has Enriched ...
    Investing News

    How Doing Your 'Share' Has Enriched ...

  9. What's At Stake As Google Takes On Amazon? ...
    Investing News

    What's At Stake As Google Takes On Amazon? ...

  10. Learn How To Invest Defensively From ...
    Investing News

    Learn How To Invest Defensively From ...

comments powered by Disqus
Hot Definitions
  1. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  2. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  3. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  4. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  5. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  6. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
Trading Center