Tax Facts

7899 / Can the owner of leased equipment deduct interest on amounts borrowed to purchase the property?

Updated: October 23, 2026 at 07:05 PM
Yes. The owner of leased equipment may generally deduct each year amounts paid for interest on indebtedness incurred to purchase the equipment. The interest may be deducted only over the period to which a prepayment relates, not when prepaid.1 However, the interest will generally be subject to the passive loss rules (see Q 7902).




1. IRC §§ 461(g)(1), 461(h).


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