Construction Interest Expense

DEFINITION of 'Construction Interest Expense'

Any interest that is paid during the construction phase of a building or other tangible property. The interest may be incurred directly as the result of a construction loan. Construction interest expense is treated differently than other types of business-related interest (see below).

BREAKING DOWN 'Construction Interest Expense'

Construction interest that is incurred on the construction of a structure intended for rental or business use is not deductible at the time that it is paid. This type of interest is added to the cost basis of the building instead. For this reason, it is also known as capitalized interest.

RELATED TERMS
  1. Construction Mortgage

    A loan borrowed to finance the construction of a home and typically ...
  2. Construction Loan

    A short-term loan used to finance the building of a home or another ...
  3. Tri-Party Agreement

    A business agreement between three separate parties. In the mortgage ...
  4. Construction Spending

    An economic indicator that measures the amount of spending towards ...
  5. Building Activity Indicators

    Economic reports that tell investors about the current and projected ...
  6. Delay In Completion Coverage

    Insurance coverage that protects the insured against costs arising ...
Related Articles
  1. Insights

    Australian Construction Sector Slows in Q1

    The total value of construction work completed in Australia slumped by 2.6% to A$47.928 billion in Q1 2016 following a 3.6% contraction in Q4 2015
  2. Investing

    Understanding Capitalized Interest

    Capitalized interest is associated with debt used to make or construct a depreciable asset.
  3. Managing Wealth

    Getting A Mortgage When Building Your Own Home

    It's much harder to get a loan when you're building a home, not moving into one. Here's where to look and what to expect.
  4. Insights

    UK Construction Slows, the Pound Tumbles

    United Kingdom's construction PMI stood at 52.0 in April, declining from 54.2 in March. The readings are well below economists’ expectations of 54.0.
  5. Investing

    Explaining Capitalized Cost

    A capitalized cost is an expense associated with a fixed asset that is added to the basis of that asset and expensed over its depreciable life.
  6. Personal Finance

    Top 10 Fastest Growing Industries in the United States

    Six of the ten fastest growing industries are directly related to new residential construction.
  7. Markets

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  8. Markets

    Simple Interest Loans: Do They Exist?

    Yes, they do. Here is what they are – and how to use them to your advantage.
  9. Markets

    10 Ways to Improve Cash Flow in Construction

    Improving cash flow in construction requires some sector-specific strategies.
  10. ETFs & Mutual Funds

    What is Accrued Income?

    In a mutual fund, accrued income is earnings that have accumulated over the year, but have not yet been paid out to shareholders.
RELATED FAQS
  1. What are the advantages and disadvantages of capitalizing interest for tax purposes?

    Learn when a company is required to capitalize its interest payments. Understand the advantages and disadvantages of capitalizing ... Read Answer >>
  2. Does the FHA provide construction loans?

    Learn how you can save with FHA-insured construction and rehabilitation mortgages that allow you to finance construction ... Read Answer >>
  3. What are typical examples of capitalized costs within a company?

    Learn examples of capitalized costs such as expenses incurred to put fixed assets to use as well as software development ... Read Answer >>
  4. What does it mean to capitalize accrued interest?

    Understand what it means when a company capitalizes accrued interest. Learn what constitutes accrued interest and what constitutes ... Read Answer >>
  5. Why is more interest paid over the life of a loan when it is capitalized?

    Learn what it means to capitalize interest on a loan. Understand why more interest is paid over the life of a loan when it ... Read Answer >>
  6. Are personal loans tax deductible?

    Find out whether interest on personal loans is tax deductible and what types of loan interest can be used to reduce your ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center