Capitalized Interest

An account created in the income statement section of a business' financial statements that holds a suitable amount of funds meant to pay off upcoming interest payments. Furthermore, this type of interest is seen as an asset and unlike most conventional types of interest, it also is expensed over time.

Some debate exists over the decision to capitalize interest for tax purposes. Some people don't prefer to take the tax deduction benefit that arises from making an interest payment spread over time in a situation where interest is capitalized. To these people, it is far more beneficial to receive the complete deduction right away.