The most common difference between accounting income and taxable income is that a corporation uses straight-line depreciation in its financial statements and accelerated depreciation in its tax return.

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Straight-line depreciation is used for financial reporting purposes because it allocates the cost of an asset evenly over its useful life. However, for tax purposes, the IRS allows corporations to use accelerated depreciation methods, such as Modified Accelerated Cost Recovery System (MACRS), which allow for larger deductions earlier in the asset's life. This results in lower taxable income for the corporation.

The Most Common Difference Between Accounting Income and Taxable Income