LOC...capitalizing the interest question

[regrow]

Hi All

I have been capitalizing the interest in my LOC and would like to pay the interest that has capitalized.

The amount is $8832.15.

By paying this amount would it be taken as an interest repayment or a principal repayment?

Regards

 

[Terry_w]

It would be a repayment of principal - the principal of the loan increases by the interest portion added each month.

However, the capitalised interest may still be claimable as a deduction depending on the circumstances.

 

[regrow]

It would be a repayment of principal - the principal of the loan increases by the interest portion added each month.

However, the capitalised interest may still be claimable as a deduction depending on the circumstances.

So therefore not deductable

Thanks Terry

Regards

 

[Terry_w]

The capitalised interest may be deductible though.

 

[Rob G.]

So therefore not deductable

Thanks Terry

Regards

You want to deduct the interest when incurred and you want to deduct it again when paying ?

Cheers,

Rob

 

[regrow]

You want to deduct the interest when incurred and you want to deduct it again when paying ?

Cheers,

Rob

No Rob that is not my intention. I never said whether i had or have not previously claimed it as a deduction. I apologize if my post made you think that I was trying to double dip so to speak.

My question that Terry had answered was whether the repayment was classed as a repayment of interest or a repayment of the principal.

Regards

 

[Rob G.]

No Rob that is not my intention. I never said whether i had or have not previously claimed it as a deduction. I apologize if my post made you think that I was trying to double dip so to speak.

My question that Terry had answered was whether the repayment was classed as a repayment of interest or a repayment of the principal.

Regards

No worries,

By 'capitalising' or compounding you have merely 'borrowed' a further amount.

This 'borrowing' is not a loss or outgoing in earning your assessable income.

If it is an investment loan, it is not the 'borrowing' but rather the 'incurring of a liability' to pay interest that is the loss or outgoing in earning assessable income.

The 'borrowing' is merely the source of the funds, i.e. a new loan.

You are merely 'repaying' loan principal, as opposed to suffering a loss or outgoing in earning your assessable income.

You are not 'paying interest' as such ... otherwise the loan would not have been growing in the first place.

Cheers,

Rob