Question

Amy borrowed $25,000 for her business from a local bank two years ago. To increase her deductions for 2018, she pays December interest of $400 and prepays January and February interest totaling $800 on December 30, 2018. The maturity date of the note is November 30, 2019. How much of the interest that she paid in December is deductible in 2018?

Answer 1

Amy can deduct the $400 interest payment in December 2018.

Step-by-step explanation:

To determine how much of the interest that Amy paid in December is deductible in 2018, we need to consider the prepaid interest and the timing of the payment. Amy paid $400 in December as interest for that month. Since the payment was made in December 2018, it is deductible for the 2018 tax year.