In general, the cost is considered to occur in the taxable year that the costs are recorded in the taxpayer's books and records. Permissible methods of accounting are the cash receipts and disbursements method and/or accrual methods consistent with the taxpayer's method of accounting used for federal income tax purposes.

Under the cash disbursement method, cost is deducted in the taxable year in which the cost, in part or total, is paid.

Under the accrual method, the cost is deducted in the taxable year that all of the events have occurred which establish the fact of the liability giving rise to the cost (in part or total), and the cost can be determined with reasonable accuracy.

A cash receipts and disbursements taxpayer may record as a cost a partial payment of an obligation to purchase qualifying property or a deposit on property which the taxpayer is obligated to purchase. The accrual basis taxpayer records a cost when all the events have accrued which fix the liability.