Acquisition Cost

Acquisition cost is the pretax amount of money it costs to gain title to any property. Acquisition cost usually applies to fixed assets. The acquisition cost accounting amount is always calculated at the amount after all discounts, closing costs, transfer costs, and other adjustments are made. Used in accounting, acquisition cost is also a term applied to IRA withdrawls for any tax penalty free amount applied to buy a first home. Acquisition cost of a first home would, then, be the post-closing cost including any repairs. Acquisition cost adjustments also include financing costs, so the IRA-eligible withdrawl amounts could include some of the mortgage fees required to close. Acquisition cost of a computer purchased for business use is a common question for IRS expense rules: “The entire acquisition cost of a computer purchased for business use can be expensed under Code section 179 in the first year if qualified, or depreciated over a 5-year recovery period.“ Acquisition cost is a required accounting line item and calculation for any MACRS expenses deducted. Acquisition cost often appears in summaries of a company’s cost to acquire customers. Acquisition cost of a customer is really a sales expense in a customer acquisition context.

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