Implicit Cost

Tax Glossary Definition

Implicit Cost

Implicit Cost – Implicit costs are the opportunity costs associated with using resources that a business already owns, rather than spending money to acquire them. These costs do not involve direct monetary payments but represent the value of benefits foregone by not deploying the resource in its next best alternative use.

Example: If an entrepreneur uses a building they own for their business instead of renting it out, the implicit cost is the rental income they forgo by using the building themselves.

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