question.jpgIn Federal Income Tax

What is interest expense?

Any time you take out a loan, the amount of money you have borrowed in known as the principal. Over time, the amount you owe to the bank or lender increases because they charge you interest. Whenever you make a payment to the borrower, part of your payment generally goes to the principal while another part goes to the interest. The amount of payments you make which goes to interest, rather than to principal, is your interest expense.