Weekly Tax Tips
Review Your Outstanding Debt to Ensure that You Make Your Interest Expense Deductible to the Maximum Extent Possible
27 Aug 2009
To be deductible, interest expense must relate to debt incurred to earn business or investment income. Note that the key point is what the money is used for and not what asset you provided as security. For example, if you mortgage your home, the interest will be deductible if you use the money to buy an income-producing asset.
Review your loans outstanding and your overall cash position. Where possible, pay off non-deductible debt as quickly as possible. Avoid using excess funds to pay off business or investment loans, if you know you will have to borrow to make large personal expenditures in the near future. Instead, consider retaining the excess funds for the planned personal expenditure.
This tax tip is a publication of BDO Dunwoody LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 27 Aug 2009.
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