Generally, cash basis taxpayers must deduct payments of prepaid interest using the accrual method.

Name: Generally, cash basis taxpayers must deduct payments of prepaid interest using the accrual method.
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Prepaid interest must be deducted using the accrual method for cash basis taxpayers according to IRS regulations. This means that the deduction is taken in the year to which the interest applies, rather than in the year in which it is actually paid.

Generally, Cash Basis Taxpayers Must Deduct Payments of Prepaid Interest