Watch the Video on Professional Fees in Obtaining Financing
… such as a mortgage, loan, or share issuance you have to watch out for some tricky tax treatments before you attempt to “write-off” these expenses.
Here is the Transcript on Professional Fees in Obtaining Financing
John Paul: Hi there, and welcome to Campanella McDonald’s Tax Tip video, where today we’re going to talk about fees incurred to obtain financing when starting up your investments or your business.
Fabio: So when you incur fees, specifically for the purpose of obtaining financing such as a loan or issuing shares, so on and so forth, these particular fees cannot be deducted immediately against your business income or property income. This is a common error that we see in our practice. Correct?
John Paul: That’s right. Yeah, a lot of people are – 90% of the people are putting it towards the income statement, rather they should be actually putting this on the balance sheet and amortizing it into income statement over five years.
Fabio: Correct. So a common error we see is, let’s say financing fees to obtain a mortgage, you pay a lawyer, you may pay a consultant, so on and so forth. These are not professional fees that you would take as a deduction immediately against your business income or your property income. You would actually amortize it 20% per year over a five year period.
John Paul: That’s right.
Fabio: Yeah. So if you are starting a new business, obtaining financing for either your business or for a property, just look out for that little caveat or contact your accountant.
John Paul: Yeah. So until next time, see you then.
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