Are extra principal payments for commercial mortgage a business expense?

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Kennedy
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Are extra principal payments for commercial mortgage a business expense?

Post by Kennedy » Tue Nov 19, 2019 12:18 am

This is probably a stupid question, but if I make extra payments to principal for my commercial mortgage note, I'm assuming this is a business expense? I know the interest is an expense, but what about payments made to the principal for a commercial building mortgage?

ClassySDLivin
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Re: Are extra principal payments for commercial mortgage a business expense?

Post by ClassySDLivin » Tue Nov 19, 2019 12:26 am

Payments toward the principal of a loan are not directly expenses, but if the mortgage is secured against a commercial property you should be deducting depreciation expense which is based on the basis of commercial property.

J295
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Re: Are extra principal payments for commercial mortgage a business expense?

Post by J295 » Tue Nov 19, 2019 1:21 am

Repayment of principal is not deductible.

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oldcomputerguy
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Re: Are extra principal payments for commercial mortgage a business expense?

Post by oldcomputerguy » Tue Nov 19, 2019 6:43 am

This topic is now in the Personal Finance forum (mortgage and loan issues).
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

huai
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Re: Are extra principal payments for commercial mortgage a business expense?

Post by huai » Tue Nov 19, 2019 10:06 am

There are 2 types of business expenses

1: operating that has to be accounted for in the period it’s incurred (mortgage interest, operations salaries, electric bills, software licenses etc)

2: capital expenses that are amortized over the useful life of the capital improvement - this could constitute real estate cost basis, R&D project salaries, vehicles, equipment).

In general you would account for both expenses as they are accrued, not when you pay for them. For operating expenses they payment schedule tends to be very closely aligned with accruing them.

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