What is a non-operating expense?

Non-operating expenses are costs that are not directly related to a company’s core business operations. These expenses arise from secondary or incidental activities and are reported separately.

What is a non-operating expense?

A non-operating expense is an ordinary business cost that results from activities outside a company’s primary operations. While these expenses still affect net income, they don’t reflect how efficiently a business runs its day-to-day operations. Separating non-operating expenses helps stakeholders better evaluate operational profitability without distortion from unrelated costs.

How to categorize non-operating expenses

Record below operating income on the income statement.
Use a dedicated “Non-Operating Expenses” section or specific accounts (such as Interest Expense or Loss on Asset Sale).
Do not include these expenses in operating expense categories like cost of goods sold or SG&A.
Clearly label and document each expense to explain its non-operating nature.

Examples of non-operating expenses

Interest expense on loans or lines of credit.
Losses from the sale or disposal of assets.
Restructuring or reorganization costs.
Foreign exchange losses.
Lawsuit settlements or penalties unrelated to core operations.
Impairment charges or write-downs.
Costs related to discontinued operations.

Tax implications for non-operating expenses

Many non-operating expenses are tax-deductible, depending on their nature and local tax laws.
Interest deductions may be subject to limits or special rules.
Capital losses may be treated differently than operating expenses for tax purposes.
Proper classification helps ensure accurate reporting and defensible deductions.
Report these expenses in the appropriate sections of your business tax return.