DEFINITION of 'Business Interest Expense'

The cost of interest that is charged on business loans used to operate the business. Business interest is deductible as an ordinary business expense. The loan must be used to either purchase assets for the business or pay for business expenses. If any amount of the loan is used for nonbusiness purposes, then the amount of deductible interest from the loan must be reduced proportionately.

BREAKING DOWN 'Business Interest Expense'

Business expenses must be deducted on the proper tax form that correlates to the business for which the expenditure was made. Taxpayers who incur corporate business expenses cannot deduct this expense on their personal returns. The business must reimburse the taxpayer and then deduct the reimbursement on the corporate return.

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