Here's the explanation, and some of it you may already know. But bear with me for those reading this thread who may not know.
Amortized costs are actually deducted from taxable imcome over time, permanently and forever.
Capitalized costs, are depreciated over time, but are not forever. Depreciated costs reduces your taxable income for each year the asset is depreciated. However, in the tax year you sell or otherwise dispose of that asset, the depreciation is recaptured and taxed in the year of the sale. So....
Amortized costs are deducted over time, and those deductions are permanent and forever.
Capitalized costs are depreciated over time, with the depreciation recaptured at some point in the future, and taxed.
To enter your amortized (and permanently deductible) costs, that must be deducted over the life of the loan, in the assets/depreciation section select the "Add and Asset" button.
- Select Intangibles/Other Property and continue.
- Select Amortizable Intangibles and continue.
- Enter the description (something like loan fees or whatever)
- Enter the amount
- Enter the closing date of the purchase, then continue.
- Select Purchased New, Used 100% for business, and enter the closing date of the purchase, then continue.
- For Code Section, select 163-Loan Fees and continue.
- Useful life in years will be the loan term. Usually it's either a 15 year loan or a 30 year loan. Enter the correct number and continue.
- Click continue again, and you're done.
