tax benefit rule
- A regulation in taxation that mandates the inclusion of recovered amounts initially used as deductions in prior tax years into the gross income of a subsequent year, up to the originally deducted amount
- Under the tax benefit rule, the recovery of previously deducted losses must be reported as gross income in the tax year it is received.
- The tax benefit rule ensures that refunded amounts used for tax deductions in the past are included in the current year's gross income.
- When the company recovered some of its bad debt, the tax benefit rule required it to include this recovery in its taxable income for that year.