Knowledge Base Solution - What is the difference between a Permanent and Temporary Difference? (2024)

A permanent difference is an expense or income item that is on the books, but will never be on the tax return or vise versa (example – Penalties can be deducted for GAAP on the books but IRS says that they cannot be deducted on the tax return).

A temporary difference is an expense or income item that is on the books and on the tax return, but as different amounts each year (example – Depreciation Book uses straight-line method of depreciation and Tax uses MACRS depreciation method).

For how to change the option for a Permanent or Temporary Difference, clickhere.

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