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For example, if you’re in the 22% bracket, your imputed income tax rate could be around 29.65% of its value. These taxes are typically withheld from the employee’s paycheck over the year or included as a lump sum during bonus or final payroll runs. Employers must report total imputed pay on Box 1 of Form W-2 and applicable amounts in Boxes 3 and 5 for Social Security and Medicare. In a McKinsey & Company survey, 78% of employers said they offer at least one voluntary employee benefit1. Even if these benefits are taxable, they help support your employees’ well-being, improve job satisfaction, and reduce turnover. Employees have the option to withhold federal income tax from their imputed pay.

Imputed income means the taxable value of non-cash benefits an employee receives from their employer, such as personal use of a company car or life insurance over $50,000. Even though no money is paid directly, the IRS requires this value to be included in the employee’s gross income for tax purposes. A frequent source of imputed income is group-term life insurance coverage that exceeds $50,000. Another common example is the personal use of a company-provided vehicle. When an employee uses a company car for commuting or other personal travel, the value of that personal use must be calculated and included in their taxable wages.

It’s added to an employee’s gross income and subject to federal income tax, Social Security, Medicare, and in many cases, state and local income taxes. Although the employee doesn’t receive this income in cash, it still increases their taxable earnings, which impacts their paycheck and W-2. Imputed income refers to the value of non-cash benefits an employee receives from an employer that must be counted as taxable income, even though the employee doesn’t receive actual money. These are often fringe benefits like group-term life insurance over $50,000, personal use of a company car, or spouse coverage on health plans. Offering fringe benefits, like a company car or tuition assistance, can be a great way to improve employee engagement and attract and retain talent.

Calculating for Other Benefits

If the employee uses the vehicle for personal purposes 30% of the time, the imputed income is $2,550. Accurate records of vehicle usage are essential for ensuring compliance with IRS guidelines. Employers are responsible for withholding federal income tax, Social Security, and Medicare taxes on imputed income. These amounts must be reported on Form W-2 to ensure compliance with IRS requirements. Employers must also adhere to state-specific regulations, which may include additional requirements or exemptions.

How is imputed income used in child support cases?

The fringe benefits are the non-cash benefits that the employer offers to the employee, while the taxable part of the monetized non-cash benefits refers to the imputed income. This relation has been presented in the following infographic to depict the crux. Domestic Partner’s imputed income is the income received against the benefits that the employer provides to the domestic partner of the employee. As the domestic partners are not considered spouses, benefits offered to them are generally taxable.

Examples and Tax Treatment of Fringe Benefits

• While these benefits can enhance overall compensation, they may increase the tax burden.
• Your imputed income appears on your W-2 in Box 1 (total taxable wages) and Box 3 & Box 5 (Social Security and Medicare wages, if applicable).
• It can also depend on the state in which you reside, as different states have varying requirements regarding what must be included when creating a pay stub or an invoice.

For federal income tax withholding, you can either add the value of the fringe benefits to the employee’s regular wages, or you can withhold at the fringe benefit tax rate of 22% . Withhold FICA tax on the fringe benefits added to the employee’s wages. There are certain benefits you can provide as an employer that are exempt from taxation. Imputed income is the value of non-cash benefits or perks which an employer provides and must be considered by the employee as income for tax purposes. Though it is not directly received in cash, imputed income is nonetheless received and may commonly be shown on your pay stub or W-2. Common examples include excess employer-provided life insurance, personal use of a company car, and fringe benefits such as gym memberships.

Imputed income is the fair market value of non-cash benefits an employee receives. These benefits are not direct wages, but they must be included in gross income for tax purposes. The IRS considers these values as compensation and taxes them accordingly, even though they are not received as money. Knowing what counts as imputed income is vital for correctly reporting your company’s taxes. Many fringe benefits are taxable depending on the value received by the employee. But other benefits are subject to taxes regardless of the value or monetary amount.

What is imputed income on a paycheck?

The FMV is the price an individual would have to pay to purchase the same benefit from a third party, not the employer’s cost to provide it. We hope it is clear from the above examples that the benefits and services are not part of imputed income. You will have to pay tax equally as other employees, no matter to what extent you benefited from it. To help you understand this, we will list some examples of benefits here. These provisions differ from country to country based on the enacted laws and regulations for the corporate sector.

In addition, they can pay the federal income tax due while filing their tax return. The IRS lists several fringe benefits that are excluded from imputed income. Some of them have appeared on our inclusion list, but certain criteria around them turn them imputed gu deduction into exempt fringe benefits. In the following list, we discuss which fringe benefits are excluded outright and which are excluded in certain circumstances. We also name any circumstances that impact their exempt or non-exempt status.

If you plan to offer your staff various fringe benefits, you need to know which ones are exempt from taxes. You also need to know how to properly report imputed income on an employee’s W-2 form. The IRS has tight standards on the information that must be disclosed on pay stubs, including imputed income information. Imputed income is shown as remuneration subject to federal income tax at the bottom of the W-2 form. This amount will differ from the total wages given earlier in the document and will be included in the total taxes line for a more detailed analysis.

Fringe benefits cover a wide array of things and some are tax free, and other are considered taxable by the IRS. Imputed income is defined as the cash value of a benefit that is not part of your employees’ salaries. Even though the benefit — like a gym membership — isn’t received in cash, it’s still taxable based on its cash value.

• The information presented in this article is accurate to the best of our knowledge at the time of publication.
• When you give employees fringe benefits like a gift card or a company car for personal use, they must pay taxes on the value of these perks.
• However, in certain cases, the financial interdependence is considered for such purposes, which are subject to the prevailing laws and rules.
• An employee can elect to withhold federal income tax from the imputed pay, or they can simply pay the amount due when filing their return.

Imputed revenue might be a challenging topic for many, but once you get the basics, the rest is easy. Cassie is a former deputy editor who collaborated with teams around the world while living in the beautiful hills of Kentucky. Prior to joining the team at Forbes Advisor, Cassie was a content operations manager and copywriting manager. Imputed income is especially common in determining child or spousal support in family law matters. Kristen Larson is a payroll specialist with over 10 years of experience in the field.

Contact the IRS directly if you have any questions regarding imputed income tax withholding requirements and exemptions. As an employer, you are likely familiar with reporting regular wages and taxes withheld on Form W-2. But, are you aware that you must report other amounts or payment types, such as imputed income? Although the tax is paid from your income, the imputed income can only be seen on the W-2 form. As the tax on this income is a part of the federal income tax, you can see your imputed income at the end of the W-2 form.

And remember, Paycor is here to help your organization with any payroll processing needs you may require. This foregone interest is then imputed as income to the borrower, as if the interest had been paid and then returned. But the main difference between the two is that fringe benefits aren’t legally required.

Reliable accounting software makes it easier to generate these insights from your financial data. Document both findings and planned adjustments to maintain accountability and track progress over time. Likewise, factor in training and professional development to maintain team effectiveness.

Master Fixed and Variable Cost Management

• The key components of a nonprofit operating budget include revenue, expenses, and surplus planning.
• Finally, budgeting software programs like Xero or QuickBooks are excellent tools for creating nonprofit budgets due to their ease of use and robust features.
• In both cases, a sound budget is important for financial sustainability and provides a guide for financial health and sustainability.
• This will also show you which funding sources are most reliable, especially true of recurring donations and multi-year grants.
• Now, take some time to consider where your revenue is headed in the quarters or years ahead.

In communicating with your board members, nonprofit leaders, and supporters about how donations are being used, transparency is key. Generate regular reports that outline your nonprofit’s financials and the impact of your programs. Capital budgeting is the process of making long-term capital asset investments and financing decisions. Capital assets are long-lasting assets that advance the organizational mission and assets, i.e., land, facilities, and costly equipment.

Overview of the Process

Most importantly, nonprofit budgets should be constructed around the organization’s programs and activities, which will help them stay focused on their goals. This includes estimating the amount of money you expect to receive from donations, grants, fundraising events, and investments. Your nonprofit’s burn rate measures the monthly negative cash flows at Accounting Services for Nonprofits: Benefits and How to Choose the Right Provider your nonprofit. Often, burn rate is used by for-profit organizations just getting their start, to measure how much they’re burning through capital before they start seeing positive returns on the business.

Review the budget periodically to ensure that it remains accurate and relevant

Instead, your budget should guide your organization’s spending, fundraising, and reporting throughout the year, so check in with it frequently. Budget surplus planning is a great overall picture for the year and can help decide what funds need to be saved in order to cover any shortfalls within the monthly budget. It also helps with planning to fund any new or expanded mission programs or objectives. It also prepares you to handle any drops in donations or rising costs that can otherwise derail your financial security. For instance, a nonprofit offering mental health programs might allocate surplus funds to hire more people to expand its services during peak demand or rent additional space as your nonprofit grows. You could easily overspend, winding up deep in debt or worse – unable to continue serving your beneficiaries.

Determining and Allocating Expenses

If the organization has never allocated costs or overhead before, spend some time discussing the concepts and practices described in this guide. Having a shared understanding and buy-in from senior leaders, financial staff, and program managers is critical to both https://holycitysinner.com/top-benefits-of-accounting-services-for-nonprofit-organizati/ creating the budget and to using the information for planning and strategic decisions. Fixed operating costs are the backbone of any charity nonprofit, ensuring that essential activities continue seamlessly. For Harmony Hearts Initiative, a successful charity nonprofit, managing these costs is crucial to achieving its mission and maintaining nonprofit financial transparency. Understanding the true, full cost of delivering various programs and services in the community is a critical piece of the management puzzle.

• An effective budget will be conservative, setting aside enough money in reserve for emergencies or for when things don’t go as planned.
• It shows how much revenue your operation plans on bringing in and how you plan on spending it.
• Many Nonprofits often work with tight nonprofit operating budgets that can make it difficult to cover all of your necessary expenses.
• For better budgetary management, many nonprofits use tools like BILL Spend & Expense that let them set budgets ahead of time and keep departments within spending limits automatically.
• Remember that effective financial management looks different for every organization.
• The best way to determine nonprofit income for a budget is to review the organization’s financial statements from the previous year.
• Your administrative and fundraising costs together make up your nonprofit’s overhead.

All funding sources can fluctuate, even government grants can dry up or disappear. This is why it’s so important to diversify your income streams as much as possible so you’re never reliant on one funding source. Some ways to do this can be hosting different or seasonal fundraising events, offering membership programs, or partnering with local businesses for sponsorships. Additionally, setting aside a small portion of your revenues during periods of surplus can act as a financial cushion if it’s possible. This way if a grant unexpectedly falls through or ceases to exist, having your reserve allows your programs and daily operations to continue without disruption.

Get started with a free nonprofit budget template

Like many businesses, nonprofit organizations often lack the resources and funding to do everything they want. As a result, they need to evaluate their budget and make cuts while continuing to grow. In order to be as effective as possible with your nonprofit budget, you need to be strategic about how you use your money. During your last budget review meeting of each quarter, review your financial data more closely and take more Everything You Should Know about Accounting Services for Nonprofit Organizations time to visualize the current and future state of your organization’s activities. A common budgeting myth is being a “nonprofit” means your organization can’t make a profit. In reality, your goal should be to budget for a revenue surplus—where your total revenue outweighs your total expenses.

Hire An Accountant or Use Accounting Software to Help

• Do the formulas, amounts, and financial results match what you expected, or do they surprise you?
• Consult your board, staff, and volunteers to understand what resources they require to effectively fulfill your organization’s mission.
• Whether you’re planning for the year or managing a specific project, a budget helps you organize your income and expenses.
• You can list anticipated revenue at the top and then include multiple rows for itemized expenses to calculate net earnings at the bottom.
• Grants can make up a significant portion of a nonprofit’s budget, accounting for around 10% of all nonprofit funding.

Additionally, determine a timeline that ensures approval prior to the fiscal year-end. Does your nonprofit use small equipment, software subscriptions, or office supplies? In the final section, we’ll explore the importance of leveraging expert financial services, such as Rooled’s outsourced CFO services, to optimize budget management and foster nonprofit success. However, this ratio is not as crucial for nonprofits as they aren’t necessarily focused on efficiency. After all, nonprofits are created to maximize impact, not to maximize profit for shareholders. The budget’s name changes to “operating budget” because the organization may alter the adopted budget throughout the fiscal year.

Who uses nonprofit financial ratios?

When creating a nonprofit budget, you’ll typically include key financial details in a structured format. By the end, you’ll have the knowledge and tools to build a reliable financial plan with confidence that balances financial constraints with your nonprofit’s ability to carry out its mission. In fact, a survey conducted by Sage found that nonprofits rank budgeting and financial planning as one of their top five internal https://nyweekly.com/business/accounting-services-for-nonprofits-benefits-and-how-to-choose-the-right-provider/ challenges. When an expense is clearly and exclusively incurred for a specific program area or cost center, we simply assign the expense to that program area or cost center.

Step 4: Accounting for Contingencies for Nonprofit budgets

A better way to understand how much you should pay staff is by analyzing the industry standards for certain positions. Check out Keela’s guide to nonprofit salaries to understand more about what to pay your team. The result of the operating margin calculation will be a decimal representing the percentage of profits yielded from operations.

Embracing and implementing church accounting guidelines and utilizing the best financial tools transformed Parable’s financial outlook. Aplos has everything you need in one place for streamlined nonprofit and church management. Internal audits prevent fraud, ensure accurate reporting, and promote accountability. Establishing controls and investigating discrepancies maintain accurate records and build trust. Categorize income from donations, rentals, and grants for accurate planning. Expenses should be divided into fixed costs (e.g., salaries) and variable costs (e.g., outreach programs) to clarify functional expenses.

Church Accounting Helps With Tax Compliance

Manage your church’s finances with ease using our top-rated accounting software. Track budgets by fund, monitor tithes and offerings, generate giving statements, and more. In church accounting, you need to list all of your income and expenses. That way, as you record transactions, you can label each transaction to better understand its purpose. This will also help you easily monitor the current balance of your ministry funds. This article will dive into how churches record and categorize income and expenses, track tithes, offerings, and donations, and even generate detailed financial reports.

Net Assets

She uses a variety of accounting software to set up client information, reconcile accounts, code expenses, run financial reports, and prepare tax returns. She is also experienced in setting up corporations with the State Corporation Commission and the IRS. When a for-profit business sells a service, the revenue is added to a single general ledger, which records the company’s financial transactions and balances. Churches use multiple small ledgers HOA Accounting based on restrictions, budgets, and allocations to track where the money is housed. These ledgers are eventually rolled up into a big chart of accounts. Nonprofits focused on accountability have different goals than organizations concentrated on profit.

Why churches choose Aplos

In general, businesses use accounting to maximize their profits, while churches aren’t legally allowed to turn a profit. I have been providing financial guidance to churches and other Christian organizations throughout the U.S. since 2003. Specifically, in the areas of accounting and finance as both a church CPA/auditor, bookkeeper, business administrator and financial consultant. I have also served as a church treasurer and business administrator. Our CFO services are designed to provide the accounting oversight you need to understand the financial side of your faith-based organization. But some churches, often innocently, http://www.midwaymanoralf.com/what-are-debits-and-credits think it’s OK to game the system.

• These are the solutions that will consider how your church works and how accounting can factor into both present and future success as a ministry.
• Financial resources are reinvested back into the organization to support its goals, such as outreach programs, community support, and spiritual growth.
• Sometimes, we’ll notice a church pays an individual contractor something to the tune of $50,000 a year!
• As an employer, you’re on the hook for half of FICA (7.65% of each employee’s income).
• In contrast, with churches, the emphasis isn’t on how much money you’re making.

to give you financial peace of mind

On the other hand, businesses focus on generating profits for the business owner or shareholders. In business accounting, conversely, the primary goal is profitability—tracking income and expenses to maximize profits. This reduces risks and supports effective financial management aligned with the church’s mission. Comparing records to bank statements ensures accuracy and supports transparent reporting. Proper payroll tax management ensures IRS compliance and avoids penalties.

Best Accounting Software for Churches

It’s the story of your present missional effectiveness and your church’s future potential. Best for organizations with $250k+ in annual revenue, needing full customization. Because ChurchBooks3 is a standalone program, your data is safely and securely stored on your local machine. To ensure your privacy ChurchBooks3 is not networked or interfaced with any third-party software over the internet. Donation widgets allow donors to quickly give to your organization without leaving your website in the form of donation popups.

If you have the resources to hire your own church accountant, more power to you. Find a third-party solution that can help you stay organized and on top of things as an organization. We’ve also made it abundantly clear that just because they aren’t required to pay taxes doesn’t mean a church should operate off of the grid. Regardless of the specifics, make sure you know who is in charge of overseeing (and improving) your church’s finances. Having an “internal” person taking care of accounting can look very different from one ministry to the next. A mega-church in a major city might employ multiple full-time, in-house CPAs, while a small rural ministry’s equivalent could consist of a volunteer bookkeeper putting in a few hours on a Monday morning.

BOOKKEEPINGBasics

You can create and print checks to pay your vendors and staff, track your spending and align it with your budget, and pay your staff and vendors through direct deposits. The accounting, membership management, and recordkeeping system PowerChurch enables growing churches to start accounting fast church accounting with a setup assistant. Nonprofit accounting is different and how to set up your chart of accounts. We’ll help you manage your church finances so you can focus on growing your church. Our best work is done when we become a true partner, serving as an extension of your team.

Compute Payroll

• Help them understand your leadership team constructed the budget to accomplish the church’s goals of reaching and helping people.
• Online donation forms are customizable, mobile-friendly forms that can be seen in tools like Aplos that equip donors with the possibility to give directly from their computer or mobile device.
• She is also experienced in setting up corporations with the State Corporation Commission and the IRS.
• You don’t want that person to be misinformed and inadvertently undercut the Payer and Approver’s efforts.
• Outsourcing your church accounting means that you have more time to spend doing what God has called you to do and our team would be honored to serve your church in this way.
• Staying informed on tax regulations prevents penalties and supports financial health.

Help them understand your leadership team constructed the budget to accomplish the church’s goals of reaching and helping people. A good church budget serves as a roadmap for the church’s financial activities, helping to allocate resources, monitor expenses, and ensure that the church’s financial goals and priorities are met. Covering fund accounting, recurring transactions, custom check printing, and automated budgeting, Church Windows can organize and streamline your finances so you can make intelligent financial decisions. The program allows its users to track budgets, create invoices and accept payments from accounts receivable customers, print accounts payable, generate accurate reports and insightful graphs, and more.

Compensating balances are a financial tool that can influence the strategic planning of any business. They play a pivotal role in how companies manage their cash flow and credit facilities, often impacting the overall cost of borrowing. A personal guarantee offers a pathway to maintain financial health without compensating balances, influencing account management practices, and service terms for individuals.

What are compensating balances classified?

• Customers who do not want to maintain a compensating balance may consider other options such as collateral-based loans, lines of credit, or credit cards.
• Opting for a voluntary compensating balance can greatly benefit individuals and businesses in managing their financial obligations efficiently.
• The purpose of this requirement is to ensure that the bank can recover some of the loan in case the business defaults.
• If you diversify your portfolio and invest in multiple companies across different industries, the impact of one company failing will be minimized.

Crowdfunding provides access to necessary funds and fosters a supportive community around the business, potentially leading to long-term customer loyalty and engagement. They essentially pay for the loan with more than just interest, sacrificing some liquidity. Have you ever heard of the term “compensating balance” in finance but weren’t quite sure what it meant? Compensating balances can also be beneficial for borrowers as they can help them secure financing that they may not otherwise be able to obtain. No, they are typically required for commercial loans but may not be necessary for personal loans. Index funds have become a cornerstone of investment strategies for both novice and seasoned…

Bank requirements: Understanding the Concept of Compensating Balance

Negotiate favorable terms – When negotiating for a loan with a compensating balance requirement, make sure to read the fine print and understand the terms. Some lenders are willing to lower the interest rate or reduce the compensating balance requirement if you have a good credit rating or a long-standing relationship with them. When it comes to managing uncertainty, compensating balances can be one of the most effective tools at your disposal. However, negotiating compensating balances with your bank can be a delicate process, with both parties looking to get the best deal possible. In this section, I’ll provide some valuable insights on how to navigate this process successfully. While compensating balances can be an effective risk mitigation strategy, they can also be costly and impact a business’s cash flow.

If the borrower agrees to a compensating balance arrangement of the minimum fixed balance, they have to maintain a prefixed minimum balance with the bank in a checking or savings account. Whenever a firm takes a loan based on the compensatory balance, it has to report it as restricted cash in its balance statements. It will indicate that the restricted cash cannot be used for immediate or general use but can be reserved only as a compensatory balance for bank usage. Although they may be viewed as a disadvantage by some businesses, they can also be used to secure loans, reduce fees, build relationships, and negotiate terms. It is important to understand how compensating balances work and how they can impact your business before making any decisions. While they may seem appealing at first, there are a number of disadvantages that businesses should consider before agreeing to them.

Opting for a voluntary compensating balance can greatly benefit individuals and businesses in managing their financial obligations efficiently. A compensating balance functions by imposing an obligation on the account holder to maintain a specified minimum balance, impacting the institution’s balance sheet and terms of service. For instance, a business that has a compensating balance of $50,000 with a bank may be able to negotiate a lower interest rate on a $500,000 loan. Just like your individual credit, you also need to build up a solid credit history with your business.

The compensating balance serves as a form of collateral for the loan and helps mitigate the lender’s risk. The borrower, on the other hand, may view compensating balances as a means to secure the loan and build a relationship with the lender. Lenders require compensating balances to reduce risk and ensure borrowers maintain liquidity. These funds act as collateral, providing financial institutions with additional security. This is common in business loans, where lenders want assurance that companies can meet their obligations.

What Are Some Examples of Compensating Balances?

• By choosing the right type of compensating balance, clients can optimize their banking relationship and reduce costs, while also helping banks to manage their own risks.
• This theory pivots around the practice of maintaining a certain minimum balance in a borrower’s bank account throughout the tenure of a loan or line of credit.
• From the customer’s perspective, while these balances may tie up funds that could be used elsewhere, they also provide a sense of security and stability in the banking relationship.

When it comes to business, one of the most important things to understand is your working capital… This proactive approach not only strengthens a company’s financial position but also instills confidence in stakeholders and investors. In the realm of B2B marketing, leveraging video content has compensating balance loans emerged as a pivotal strategy for… Over the years, we’ve refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content.

Reason 1: Lower Rates

If you’re interested in finding out more about compensating balances, then get in touch with the financial experts at GoCardless. However, any interest earned on cash balances or dividends from securities held as compensating balances may be subject to taxation, depending on the customer’s jurisdiction and tax status. This can translate into more favorable terms on future loans, faster loan approvals, and even waived fees in certain cases. The compensating balance, in essence, becomes a stepping stone to building trust and securing better deals. The lender can use the locked-in funds to make additional loans, increasing their overall profitability.

This can be particularly challenging for smaller businesses or individuals with tight budgets. The reduced liquidity might hinder your ability to make timely payments, cover unexpected expenses, or seize sudden business opportunities. A compensating balance can be the key to unlocking financing for borrowers with less-than-ideal credit scores or seeking high-risk loans. For businesses experiencing fluctuating cash flow, this readily available financial cushion can be invaluable. While the compensating balance restricts a portion of their liquidity, it provides a safety net and ensures access to credit when opportunities arise.

Method 2: Minimum Fixed Balance Arrangement

The compensating balance is not available for company use, and may need to be disclosed in the borrower’s notes to the financial statements. The bank is free to loan the compensating balance to other borrowers and profit from differences between the interest rates. The negotiation process also provides an opportunity for businesses to discuss the possibility of using compensating balances to access additional banking services. For instance, a company might negotiate the use of these balances to secure a line of credit, which can be a flexible tool for managing short-term liquidity needs. This can be particularly beneficial for businesses that experience significant fluctuations in cash flow. This approach allows businesses to access funding without being restricted by the burdensome requirement of maintaining compensating balances.

How do compensating balances benefit banks?

Because the portion of the loan set aside as a compensating balance isn’t available for use, but interest is charged on the entire loan amount. The interest rates and terms of the borrowing agreements are not affected by the compensating balance requirement. These balances will remain on deposit with the financial institutions for the duration of the agreements, which expire on December 31, 20YY. Some accounts may have tiered minimum balance requirements, where higher balances result in increased benefits or perks. Yes, compensating balances can often be negotiated between the borrower and lender.

As a result, XYZ Corporation would have to pay the compensating balance to the lender every month, irrespective of whether it is using the balance fund or not. Even if XYZ Corporation decides to utilize the credit line in full, it will have to pay the interest on the loan amount plus the compensation balance. From a tax perspective, compensating balances are not deductible as an expense since they are not an outright cost but rather a borrowing condition. While interest paid on a loan is deductible under IRC Section 163, the opportunity cost of keeping funds in a restricted account is not. The business could have otherwise invested the money in higher-yielding assets or used it for operations.