Amortization has different meanings for loan payments and for taxes. In the context of loans, amortization refers to separating the payments for the loan principal and interest into periodic payments to where the loan is paid off at a specified time, thereby gradually r…
What is amortization?
In the context of tax and accounting, amortization refers to the strategy of steadily writing off capital expenses a business incurs from an intangible asset to match the revenues the asset produces, such as over a 15-year period based on the IRS’s guideline (see: Intangibles by the IRS). These intangible assets could include patents, copyrights, trademarks, goodwill, etc. This has the effect of reducing the stated income of the business, which reduces its tax obligations.
Why amortization matters
amortization appears in U.S. legal practice across multiple practice areas. Knowing what it means — and when it applies — can determine the outcome of motions, filings, and negotiations. For non-lawyers, the value of looking up a precise definition is that legal terms often carry meanings that differ from everyday usage; relying on the common meaning can lead to costly missteps.
How amortization works in practice
In practice, amortization is invoked when parties, judges, or attorneys need to identify the legal status of an issue, the rights of those involved, or the procedural step required next. The definition shown above is sourced from Cornell LII Wex , which is widely cited in U.S. legal practice. Because U.S. law is jurisdictionally layered — federal, state, and sometimes local — the precise application of the term can vary by court, so check the controlling authority for your specific case.