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QUESTION DETAIL
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I have an equipment finance agreement in place. The contract requires 60 monthly payments of $791.76 ($47,505.60 total). The cost of the new equipment was $34,165.91. No interest rate is specified in the contract, but the contract states, "payments will be paid monthly, unconditionally throughout the term of the contract, each in the amount of the monthly payment. In the event this contract is paid off prior to end of the initial term, the method of such prepayment is computed as the present value of the then remaining payments discounted at a 4% annual rate. How do I calculate interest paid in order to deduct it as a business expense?
ANSWER
The BIDaWIZ Team's Answer:
Are you electing Section 179 treatment for the equipment? In any event, we know that the cost of the equipment is $34,165.91, but the total amount to be paid will be $47,505.60 over a 5 year period or 60 months. Therefore, you will be paying $$13,339.69 in total interest or $222.33 per month of the $791.76.
