Tax treatment of Interest on Loans Written off

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dow jones

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For personnel income tax purposes interest accrued is allowed as a tax write off against rental income.

If the loan is subsequently written off anyone know the tax treatment of that interest? eg e200k loan is written off in March 2017 but interest accrued (never paid) of e12k in 2016. Can you actually write that off that e25k against rental income for 2016 or is this cake and eating it in the extreme?
 
Sorry I'm not sure how to edit posts but the post should have read

Can you actually write that off that e12k against rental income for 2016 or is this cake and eating it in the extreme?
 
Well if you don't pay the interest you should not get a deduction for it.

I understand that the bank will give you a schedule of what is being discharged so presumable the overdue interest is paid first and then the capital!
 
I appreciate what your'e saying Joe but when the interest was paid I was only able to write off 75% of it. I'm just trying to find out the correct 'legal' treatment
 
Well normally expenses are tax deductible as incurred not as paid. So the interest would be tax deductible. So it seems as regards that interest expense you can have your cake and eat it.

Surely the interest and principal written off are taxable as income.
 
cremeegg said:
Well normally expenses are tax deductible as incurred not as paid. So the interest would be tax deductible. So it seems as regards that interest expense you can have your cake and eat it.

Surely the interest and principal written off are taxable as income.
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But if the interest is subsequently written off surely it would then be a taxable receipt ?
 
The tax treatment of debt write off is a bit strange.

In relation to interest if it is not paid then it can be claimed as a deduction, if it is claimed and subsequently written off it should be include as income.

In relation to the capital element of a loan written off, the write off is not taxable in itself but what the write off does it reduces the base cost of the asset where there is a capital loss.

So Bob paid €1m for the asset and gets a write down of €200k. Bobs base cost for computing a CGT loss is €800k rather then €1m.
 
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