DEFINITION of Assessable Profit

Assessable profit is a calculation used in tax law to determine an individual's taxable income based upon gains or losses on funds held in taxable investment accounts. It is taken net of items such as investment account expenses, depreciation, and charitable donations. Essentially, it is taxable income after accounting for allowable deductions.

BREAKING DOWN Assessable Profit

Assessable profits are an important tax measure in constituencies where tax payers may see large portions of taxable income come from investments held in taxable investment accounts. Taxable investment accounts are often referred to brokerage accounts in the U.S. They are investment accounts that are funded with money upon which taxes have already been paid and any growth on the initial investment is also taxable. This can be contrasted with non-taxable or tax deferred investment accounts which are funded with pre-tax dollars (or after-tax dollars in the case of a Roth IRA) and the money in the account is able to grow free from taxability.

Example of Assessable Profits

In Hong Kong, for instance, assessable profits are used to determine an individual's Hong Kong taxes payable. Profits from investment accounts less account expenses are used when computing income tax. Such tax income is important for jurisdictions that rely on taxation for a bulk of their budgetary capital.