Dictionary of Accounting Terms: tax effect
tax effect
- general term describing the consequences of a specific tax scenario with respect to a particular tax-paying entity. Many factors are considered such as time elements, projections and estimates of revenues, expenses, deductions, acquisitions, disposals, and the like and their relationship upon present and future tax liability.
- impact on taxes of a taxable revenue or expense item. For instance, an interest expense itemized deduction of $2000 will result in tax savings of $560 at the 28% tax bracket.
