A one-time expense is a material cost that falls outside a business’s or household’s normal operations and isn’t expected to repeat — a restructuring charge, a legal settlement, a major equipment purchase, a catastrophic medical bill. One-time expenses matter because they can distort reported profits if lumped in with routine costs, and they follow their own rules for both financial reporting and tax deductions.
What Counts as a One-Time Expense
The label hinges on two qualities. The cost is infrequent, and it doesn’t stem from core revenue-generating activity. Payroll, rent, inventory, and software subscriptions are recurring because they show up predictably and keep the business running. A one-time expense results from a discrete event — a lawsuit, a factory closure, a natural disaster — that management doesn’t expect to face again in the foreseeable future.
Size matters too. A $200 one-off repair might technically be non-recurring, but nobody is going to break it out on a financial statement. The expense needs to be material: large enough relative to overall results that ignoring it would mislead someone reading the financials. Auditors typically assess materiality in a range of 3 to 10 percent of pre-tax profit, with publicly traded companies generally held to the lower end.
You may still hear the phrase “extraordinary item.” U.S. accounting standards once treated that as a formal income statement category, but the Financial Accounting Standards Board eliminated it in 2015. Companies still report unusual or infrequent costs separately, but there is no special “extraordinary” line on the income statement anymore. When someone uses the phrase today, they are speaking loosely rather than pointing to a defined category.
Common Examples
Business
Restructuring is the classic case. When a company shuts down a division, closes facilities, or lays off a significant portion of its workforce, the severance payments, lease termination fees, and write-downs of abandoned assets all qualify as non-recurring charges. Accounting rules require the company to recognize a liability only once it has formally committed to the plan.
Legal settlements and judgments are another frequent source. A company that resolves a major patent dispute or pays product liability damages will usually classify the payout as a one-time charge, because the specific litigation is unlikely to recur in the same form. Merger and acquisition costs — banking fees, legal due diligence, integration expenses — similarly fall outside normal operations.
Asset impairments round out the list. When a long-lived asset like a factory, a patent portfolio, or goodwill from a prior acquisition loses value faster than expected, the company must write down its book value, and the write-down hits the income statement as a one-time impairment charge. These can be enormous; technology companies have recorded multi-billion-dollar goodwill impairments after acquisitions that didn’t pan out.
Personal
Individuals face their own version. A catastrophic medical event that runs to six-figure hospital bills is nothing like a routine checkup. Unplanned home repairs such as a failed foundation or storm damage to a roof can easily exceed a year of normal maintenance. Legal costs tied to a divorce, an estate dispute, or defending a lawsuit are similarly unpredictable and often substantial.
The budgeting problem mirrors the accounting problem. If you fold a $30,000 roof replacement into your monthly spending analysis, it looks like your household costs have permanently spiked, when in reality that expense won’t recur for decades.
How One-Time Expenses Appear on Financial Statements
Under Generally Accepted Accounting Principles, there is no single line item labeled “one-time expenses.” Different types of non-recurring costs follow different standards. Restructuring charges require a formal commitment to an exit or disposal plan before the liability is booked. Impairments on long-lived assets require a comparison of carrying value to fair value, with any shortfall recognized as a loss. What ties them together is the goal of keeping these charges visible so readers can separate them from ongoing operating results.
Most companies present non-recurring charges below operating income, or as a clearly labeled line within operating expenses. Placement matters because operating income is the metric investors use to gauge how well the core business performs. Burying a $50 million restructuring charge inside general administrative expenses would inflate operating costs and make the business look less profitable than it actually is on a sustainable basis.
Analysts take this further through earnings normalization. They strip out one-time charges to calculate what the company would have earned from operations alone. If a company reports $10 million in net income after absorbing a $5 million legal settlement, an analyst would add back the settlement to arrive at $15 million in normalized earnings, a figure that better represents ongoing earning power. The adjusted number feeds directly into valuation models and peer comparisons.
The same logic applies to EBITDA (earnings before interest, taxes, depreciation, and amortization), the standard profitability metric in lending and deal-making. Loan agreements routinely allow borrowers to add back restructuring charges, one-time integration costs, and similar items when calculating EBITDA for covenant compliance. The risk is that aggressive add-backs can make a struggling company look healthier than it is, which is why lenders and the SEC both scrutinize what gets excluded.
What Public Companies Have to Disclose
A company can’t simply label a charge “one-time” and move on. The SEC requires prompt disclosure of material non-recurring events through Form 8-K. Two triggers are especially relevant: a commitment to an exit or disposal plan expected to produce material charges, and a conclusion that a material impairment charge is required on one or more assets. For acquisitions and dispositions, a filing is triggered when the assets involved exceed 10 percent of total consolidated assets.1SEC.gov. Form 8-K Current Report
The SEC also polices how companies use non-GAAP financial measures, which are the adjusted earnings figures that strip out one-time charges. Staff guidance makes clear that excluding normal, recurring cash operating expenses necessary to run the business can make a non-GAAP measure misleading, even if each individual exclusion looks reasonable. An expense that happens repeatedly or occasionally, including at irregular intervals, is considered recurring in the SEC’s view.2U.S. Securities and Exchange Commission. Non-GAAP Financial Measures The SEC has brought enforcement actions against companies that described routine audit and accounting costs as non-recurring to inflate their adjusted earnings. The label has to match reality, not management’s preferred narrative.
Business Tax Treatment
A one-time expense doesn’t automatically translate into a one-time tax deduction. The IRS draws a sharp line between current expenses and capital expenditures. Under federal tax law, a business can deduct “ordinary and necessary” expenses paid during the tax year in carrying on a trade or business.3Office of the Law Revision Counsel. 26 U.S. Code 162 – Trade or Business Expenses “Ordinary” means the type of cost is common in that industry, and “necessary” means it’s helpful for the business, not that it’s indispensable. A legal settlement arising from normal business risk is generally deductible as an ordinary business expense even though the specific lawsuit was a one-off event.
Capital expenditures — buying equipment, constructing a building, acquiring another company — follow different rules. These costs must generally be spread over the asset’s useful life through depreciation rather than deducted all at once. The major exception is the Section 179 deduction, which lets businesses immediately expense qualifying property in the year it’s placed in service. For 2025, the maximum Section 179 deduction is $2,500,000, and the deduction begins phasing out when total qualifying purchases exceed $4,000,000.4Internal Revenue Service. 2025 Instructions for Form 4562 These thresholds adjust for inflation annually, and for 2026 they are expected to rise to approximately $2,560,000 and $4,090,000 respectively.
When a large one-time expense pushes a business into a net loss, the net operating loss rules determine how much relief it gets. C corporations can carry losses forward indefinitely but can only offset up to 80 percent of taxable income in any future year.5Office of the Law Revision Counsel. 26 U.S. Code 172 – Net Operating Loss Deduction Pass-through businesses — S corporations, partnerships, and sole proprietorships — face an additional cap. For 2026, excess business losses above $256,000 for single filers or $512,000 for joint filers cannot be deducted in the current year and must be carried forward.
Individual Tax Treatment
Individuals have fewer options. Most personal one-time expenses, such as divorce attorney fees or emergency home repairs from normal wear and tear, are not deductible at all. The main exception is casualty and theft losses. Beginning in 2026, personal casualty loss deductions are available for losses from both federally declared and state-declared disasters.6Internal Revenue Service. Casualty Loss Deduction Expanded and Made Permanent Even then, the deduction is limited. You must subtract $100 per casualty event, then reduce the total by 10 percent of your adjusted gross income before any deduction applies.7Internal Revenue Service. Topic No. 515, Casualty, Disaster, and Theft Losses For a household with $80,000 in AGI hit by a single disaster causing $20,000 in uninsured damage, the deductible amount works out to $11,900 ($20,000 minus $100, minus $8,000).
Planning for Non-Recurring Costs
You can’t predict exactly when a one-time expense will hit, which is the whole reason to treat it as its own category. The standard advice of keeping three to six months of essential expenses in a liquid emergency fund exists for this reason. That buffer covers the gap between when a non-recurring cost lands and when you can adjust the rest of your finances. For businesses, the equivalent is a contingency reserve built into the annual budget, sized to the company’s risk profile and historical experience with unplanned costs.
For large purchases you can see coming, such as replacing a vehicle or upgrading a roof nearing the end of its useful life, a sinking fund works better than an emergency reserve. You set aside a fixed amount each month in a dedicated account so the money is ready when the expense arrives. Emergency funds handle surprises; sinking funds handle certainties with uncertain timing. Mixing the two leaves you exposed when both hit in the same year.
Insurance converts unpredictable one-time costs into predictable recurring premiums, which is the kind of reclassification this whole category is about. Homeowners insurance, health insurance, and commercial property policies all absorb the financial shock of non-recurring events. For businesses, business interruption coverage can replace lost revenue and cover ongoing expenses like rent, payroll, and loan payments during a forced shutdown from a covered event.
Businesses that run a single combined budget tend to discover, painfully, that a large capital expenditure in one quarter starves operating accounts for the rest of the year. The fix is to maintain separate budgets for ongoing operations and for capital or non-recurring items. The capital budget should account for both planned investments and a reserve for unplanned ones, so when a one-time expense hits it draws from the capital reserve rather than the operating budget. The same logic applies to personal finances: treating a roof replacement as coming from savings rather than from monthly income keeps a temporary cost from creating a permanent spending crunch.