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loans are different for corporations due to the interest being deductible (colloquially called 'tax shields'). along with the carryforward provision, that can s

loans are different for corporations due to the interest being deductible (colloquially called 'tax shields'). along with the carryforward provision, that can so valuable that it's the principal reason why a given company is bought. personal loans have no such leeway and value.

gamblor956 6y ago
The interest on personal loans is also deductible, if used for (a) education, (b) buying a residence, or (c) for business activities of the individual.
- clairity 6y ago
  sure, there are a few exceptions, but carveouts result in distortions that lead to unintended consequences, as we see in all of those instances (e.g., higher economic rents). for greater fairness and more efficiency in markets, we should reduce carveouts for both corporations and individuals, not try to justify the ones we have.
- bradleyjg 6y ago
  > (a) education, (b) buying a residence Only up to some low limit. Netflix can deduct unlimited interest.
  - gamblor956 6y ago
    No, it can't. Business interest deduction is limited to 30% of taxable income...
    - clairity 6y ago
      it's difficult to get to 30% of EBITDA (the actual yardstick) in interest payments, but if you do, the carryforward is unlimited, so it's effectively unlimited.
      - gamblor956 6y ago
        The actual yard stick is only EBITDA through this year, and EBIT thereafter, and moreover, it's the tax versions of EBITDA and EBIT, not the accounting versions. For starters, the tax versions use taxable income as the base, not book income, and don't add back in most non-cash items, so the threshold is much lower. Many businesses were hit by this interest limitation in 2018 and 2019. There are dozens of articles from major tax firms about it. Yes, a business can carryforward their unused interest to a future year in which they have spare income to apply it. But that means they have to have sufficient profits and reduced loans in order to take advantage of their interest expenses. If a business is unprofitable, churn loans, or increases its debt load, the business effectively loses out on a lot of the benefit of most of its interest expense.
        clairity 6y ago
        ok, i'll take your word for it since it's not something i follow that closely. i'd just also reiterate that all this rigamarole is not worth it (for the generally claimed increase in productivity and investment), and we should just simplify and equalize individual and corporate tax law.

gamblor956 6y ago

The interest on personal loans is also deductible, if used for (a) education, (b) buying a residence, or (c) for business activities of the individual.

clairity 6y ago
sure, there are a few exceptions, but carveouts result in distortions that lead to unintended consequences, as we see in all of those instances (e.g., higher economic rents). for greater fairness and more efficiency in markets, we should reduce carveouts for both corporations and individuals, not try to justify the ones we have.
bradleyjg 6y ago
> (a) education, (b) buying a residence Only up to some low limit. Netflix can deduct unlimited interest.
- gamblor956 6y ago
  No, it can't. Business interest deduction is limited to 30% of taxable income...
  - clairity 6y ago
    it's difficult to get to 30% of EBITDA (the actual yardstick) in interest payments, but if you do, the carryforward is unlimited, so it's effectively unlimited.
    - gamblor956 6y ago
      The actual yard stick is only EBITDA through this year, and EBIT thereafter, and moreover, it's the tax versions of EBITDA and EBIT, not the accounting versions. For starters, the tax versions use taxable income as the base, not book income, and don't add back in most non-cash items, so the threshold is much lower. Many businesses were hit by this interest limitation in 2018 and 2019. There are dozens of articles from major tax firms about it. Yes, a business can carryforward their unused interest to a future year in which they have spare income to apply it. But that means they have to have sufficient profits and reduced loans in order to take advantage of their interest expenses. If a business is unprofitable, churn loans, or increases its debt load, the business effectively loses out on a lot of the benefit of most of its interest expense.
      - clairity 6y ago
        ok, i'll take your word for it since it's not something i follow that closely. i'd just also reiterate that all this rigamarole is not worth it (for the generally claimed increase in productivity and investment), and we should just simplify and equalize individual and corporate tax law.