Can a business mortgage payment due in 2009 be prepaid in 2008 to use the interest as an expense in 2008? My banker said that interest cannot be prepaid. I could use additional expense to reduce profit/tax liability in 2008. Would I be better off to make additional principal only payments to reduce the mortgage?

Your banker is correct. You can't prepay interest because interest is accrued based on your principal amount. Any extra payment made is applied to your principal.

Now, when you ask if you would be better off making additional principal payments, the answer is "it depends". Let me give you an example. My co-worker pulled all of his money out of the stock market because it was declining. As a result he had a lot of cash on hand and decided that he doesn't need the money for anything over the next few years, so he paid down his mortgage, which in effect saves him the interest he would have paid for that portion.

You have look at your individual situation to decide. Mortgages usually have really good interest rates (compared to any other type of loan), so generally I wouldn't recommend making extra payments because you could use that money in other ways.