Capitalized Interest

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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.

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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.

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RELATED FAQS
  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. 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 >>
  3. 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 >>
  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. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>

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