Capitalized Interest


DEFINITION of 'Capitalized Interest'

An account created in the income statement section of a business' financial statements that holds a suitable amount of funds meant to pay off upcoming interest payments. Furthermore, this type of interest is seen as an asset and unlike most conventional types of interest, it also is expensed over time.


Loading the player...

BREAKING DOWN 'Capitalized Interest'

Some debate exists over the decision to capitalize interest for tax purposes. Some people don't prefer to take the tax deduction benefit that arises from making an interest payment spread over time in a situation where interest is capitalized. To these people, it is far more beneficial to receive the complete deduction right away.

  1. Interest

    The charge for the privilege of borrowing money, typically expressed ...
  2. Debt-Service Coverage Ratio (DSCR)

    In corporate finance, the Debt-Service Coverage Ratio (DSCR) ...
  3. Amortization

    1. The paying off of debt in regular installments over a period ...
  4. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense ...
  5. Effective Interest Method

    The practice of accounting for the discount at which a bond is ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when ...
Related Articles
  1. Economics

    Understanding Capitalized Interest

    Capitalized interest is associated with debt used to make or construct a depreciable asset.
  2. Savings

    Don't Forget The Kids: Save For Their Education And Retirement

    Retirement and education financing are the two most important planning items for taxpayers.
  3. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  4. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  5. Credit & Loans

    Digging Out Of Personal Debt

    Find out why good intentions can put consumers in an even bigger hole than before.
  6. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  7. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  8. Investing Basics

    How To Efficiently Read An Annual Report

    Annual reports are clearly prepared without any intent to deceive or mislead investors. Still, investors should read them with a dose of skepticism.
  9. Investing Basics

    Explaining Financial Statement Analysis

    Financial statement analysis is the process of reviewing a company’s statements to gain an understanding of its financial health.
  10. Investing Basics

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
  1. When capitalizing interest, will interest accrue while you are in a deferment?

    When capitalizing interest, interest accrues while a person is in a deferment of his loan. In the event of a deferment, the ... Read Full Answer >>
  2. What are the advantages and disadvantages of capitalizing interest for tax purposes?

    The advantages and disadvantages of capitalizing interest for tax purposes lie in a company's ability to manage or manipulate ... Read Full Answer >>
  3. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  4. What does it mean to capitalize accrued interest?

    When a company capitalizes accrued interest, it adds up the total amount of interest owed since the last debt payment made ... Read Full Answer >>
  5. Does interest on my student loan accumulate during forbearance?

    The interest on your account is calculated and capitalized, or added to the principal loan amount, during a forbearance. ... Read Full Answer >>
  6. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center