You will be able to deduct the loan proceeds that are currently reported on your 1099-K as income.
It is very important that you report the full amount of 1099 income as shown on the form. The IRS does have a matching program to ensure that all 1099s reported to them are included on the recipient's income tax returns. However, in a case such as yours, you should then treat the amount that was not actually income as a deduction.
In the Expenses portion of your Schedule C (Self-employed profit or loss), you should add Other miscellaneous expenses. For the description, put in "Loan proceeds reported as income on 1099-K" and then enter the amount of the loan you received.
You will be able to deduct the loan proceeds that are currently reported on your 1099-K as income.
It is very important that you report the full amount of 1099 income as shown on the form. The IRS does have a matching program to ensure that all 1099s reported to them are included on the recipient's income tax returns. However, in a case such as yours, you should then treat the amount that was not actually income as a deduction.
In the Expenses portion of your Schedule C (Self-employed profit or loss), you should add Other miscellaneous expenses. For the description, put in "Loan proceeds reported as income on 1099-K" and then enter the amount of the loan you received.