for tax purposes, the internal revenue code permits the deduction of business expenses in the tax payable year in which those expenses are paid or incurred. this is in contrast to capital expenditures that are paid or incurred to acquire an asset. expenses are costs that do not acquire, improve, or prolong the life of an asset. for example, a person who buys a new truck for a business would be making a capital expenditure because they have acquired a new business-related asset. this cost could not be deducted in the current taxable year. however, the gas the person buys during that year to fuel that truck would be considered a deductible expense. the cost of purchasing gas does not improve or prolong the life of the truck but simply allows the truck to run.