The main differences may concern timing and differences in recognition. The time difference affects income such as advance rent for GAAP and tax reporting purposes. Additionally, timing differences may be due to different asset valuation methods, such as different depreciation rates under GAAP and tax accounting rules. There is also a difference in how taxes are reported in GAAP and tax accounting. GAAP reporting does not accurately present taxes paid. Tax reporting does not accurately reflect the useful life of equipment. Another may be the recognition of liabilities, revenues or expenses. When rental payments are collected in advance, under GAAP, the applied rent revenue is recognized as earned. The tax code enforced the collection of rent as taxable income (New York Life). Recognition differences may be permanent differences in which certain income and expense items are recognized under GAAP but not for tax purposes, or vice versa. For example, some tax-exempt income will not be considered in your tax accounting. Likewise, some expenses may not be deductible from tax accounting. Another difference may be municipal revenue bonds. In GAAP, revenue recognized as interest is earned. Under the Tax Code, interest income is exempt from federal tax