Daniel Bunn President and CEO at Tax Foundation | Twitter Website
A super-deduction is a tax policy that allows businesses to deduct more than the full amount of their eligible expenses from taxable income. This effectively acts as a subsidy for certain costs, often applied to capital expenditures or research and development (R&D) spending.
Super-deductions and other capital allowances are mechanisms for cost recovery, enabling businesses to recoup the costs of their investments. These deductions play a crucial role in shaping a business's tax base and can influence investment decisions.
In the United Kingdom, there is a temporary super-deduction policy allowing businesses to deduct 130 percent of investment costs made within a year. For instance, if a U.K. business purchases a $10,000 machine in 2021, it can deduct $13,000 from its revenues in that year.
Currently, over twelve countries offer super-deductions for innovation-related spending. These deductions range from 100 to 300 percent of partial or all R&D expenses and investments.
