I have a business that is dorment but I have a loan that I am still paying on. Can I claim interest on business loan each year?
Yes you can.
Outstanding DebtDid you borrow money for the purpose of operating your business, and there will still be a part of the loan outstanding? Here are the rules, directly from the Income Tax Act:
s. 20.1(2) Borrowed money used to earn income from business — Where at any particular time after 1993 a taxpayer ceases to carry on a business and, as a consequence, borrowed money ceases to be used by the taxpayer for the purpose of earning income from the business, the following rules apply:
shall be deemed to have been used by the taxpayer immediately before the time of disposition to acquire the property;
In other words, yes , the interest is still deductible until the debt is repaid, and the interest expense will still be considered to be interest paid for the purpose of earning income from the business.
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