A one-time expense is a material cost that falls outside a company’s or household’s normal operations and isn’t expected to repeat — think restructuring charges, legal settlements, major equipment purchases, or a catastrophic medical bill. The label matters because these costs are reported, deducted, and planned for differently than routine spending. Get the classification wrong and you distort your profit picture, overstate or understate your tax liability, or blow up a budget that would otherwise hold together.
What Counts as a One-Time Expense
Two qualities define the category: the cost is infrequent, and it doesn’t come from the 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 see again in the foreseeable future.
Size matters too. A $200 one-off repair is technically non-recurring, but nobody breaks it out on a financial statement. To warrant separate treatment, the expense has to be material: large enough relative to overall results that ignoring it would mislead someone reading the numbers.
You may still hear the phrase “extraordinary item.” U.S. accounting standards used to treat that as a formal income statement category, but the Financial Accounting Standards Board eliminated the classification in 2015 after concluding it created more confusion than clarity. Companies still report unusual or infrequent costs separately; there simply is no special “extraordinary” line item anymore. When the phrase appears in a modern earnings release, it’s being used loosely.
Common Examples
For Businesses
Restructuring is the classic case. When a company shuts a division, closes facilities, or lays off a significant part of its workforce, the severance payments, lease termination fees, and write-downs of abandoned assets all qualify as non-recurring charges. For large corporations these can run into the hundreds of millions of dollars, and accounting rules require the company to recognize the liability only after formally committing to the plan.
Legal settlements and judgments are another frequent source. A company resolving a major patent dispute or paying damages from a product liability case will usually classify the payout as a one-time charge, since the specific litigation is unlikely to recur in the same form. Merger and acquisition costs — investment banking fees, legal due diligence, integration expenses — similarly fall outside normal operations and typically appear as separate line items.
Asset impairments round out the list. When a long-lived asset such as a factory, patent portfolio, or goodwill from a prior acquisition loses value faster than expected, the company must write down its book value, and that write-down hits the income statement as a one-time impairment charge. Technology companies have recorded multi-billion-dollar goodwill impairments after acquisitions that didn’t pan out.
For Individuals
Households face their own version of the same problem. A catastrophic medical event that racks up six-figure hospital bills is nothing like a routine annual checkup. Unplanned home repairs — a failed foundation, storm damage to a roof — can easily exceed a year’s worth of normal maintenance. Legal costs tied to a divorce, an estate dispute, or defending a lawsuit are similarly unpredictable and often substantial.
The budgeting challenge is the mirror image of the accounting challenge. Fold a $30,000 roof replacement into a monthly spending analysis and it looks like household costs have permanently spiked, when in reality that expense won’t recur for decades.
How Businesses Report Them
Under U.S. Generally Accepted Accounting Principles, there is no single line labeled “one-time expenses.” Different types of non-recurring costs follow different reporting standards. Restructuring charges are recognized only after a formal commitment to an exit or disposal plan. Impairment charges compare an asset’s carrying value to its fair value, with any shortfall booked as a loss. What ties the rules 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 on the income statement, 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 on a sustainable basis than it really is.
Analysts push 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 adds back that 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 drives EBITDA (earnings before interest, taxes, depreciation, and amortization), the standard profitability measure 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. 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.
SEC Disclosure Rules for Public Companies
Public companies 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 the company’s total consolidated assets.1SEC.gov. Form 8-K Current Report
The SEC also polices how companies use non-GAAP financial measures. 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 adjusted earnings. The label has to match reality, not management’s preferred narrative.
Tax Rules for Businesses
A one-time expense doesn’t automatically translate into a one-time 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 the industry; “necessary” means it’s helpful, not indispensable. A legal settlement arising from normal business risk, for example, is generally deductible as an ordinary business expense even though the specific lawsuit was a one-off event.
Capital expenditures follow different rules. Buying equipment, constructing a building, or acquiring another company generally has to be spread over the asset’s useful life through depreciation rather than deducted all at once. The main 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, with the deduction phasing out once 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.
When a large one-time cost pushes a business into a net loss for the year, the net operating loss rules determine how much relief comes. 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 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.
Tax Rules for Individuals
Individuals have fewer options. Most personal one-time expenses — divorce attorney fees, 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: subtract $100 per casualty event, then reduce the total by 10 percent of adjusted gross income before any deduction applies.7Internal Revenue Service. Topic No. 515, Casualty, Disaster, and Theft Losses A household with $80,000 in AGI hit by a single disaster causing $20,000 in uninsured damage ends up with a deductible amount of $11,900 ($20,000 minus $100, minus $8,000).
Planning for Costs You Can’t Schedule
The whole point of naming one-time expenses as a separate category is that you can’t predict exactly when they’ll hit. The standard advice of keeping three to six months of essential expenses in a liquid emergency fund exists precisely for this reason. The 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 history with unplanned costs.
For large purchases you can see coming, like replacing a vehicle or upgrading a roof nearing the end of its 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 another form of the same reclassification. Homeowners, health, and commercial property policies all exist to 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, with the capital budget covering both planned investments and a reserve for unplanned ones. When a one-time expense hits, it draws from the capital reserve rather than the operating budget, keeping day-to-day cash flow intact. The same logic applies at home. Treating a roof replacement as coming from savings rather than from monthly income prevents a temporary cost from creating a permanent spending crunch.