Capitalized Interest

Loading the player...

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.

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.

RELATED TERMS
  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. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  2. Economics

    Understanding Capitalized Interest

    Capitalized interest is associated with debt used to make or construct a depreciable asset.
  3. 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.
  4. 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.
  5. Credit & Loans

    Digging Out Of Personal Debt

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

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  7. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  8. Investing Basics

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  9. Stock Analysis

    Understanding Chipotle's Financials (CMG)

    Learn about Chipotle Mexican Grill and its financial statements, including metrics such as comparable sales, operating margin and returns.
  10. Investing Basics

    How To Decode A Company’s Earnings Reports

    Earnings reports tell investors how a publicly-traded company is performing, but aren’t always easy to decipher.
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 items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center