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Question

I am making payments on a loan (principal and interest) where and how do I deduct?

Forum|Forum|7 years ago
June 5, 2019
1 reply
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TurboTax Self Employed Online

A

Anonymous

Principal repayment of a loan is never tax-deductible.

Business interest expense is an amount charged for the use of money you borrowed for business activities.

You can generally deduct as a business expense all interest you pay [or accrue, if you use the accrual method of accounting] during the tax year on debts related to your trade or business. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan. You can deduct interest on a debt only if you meet all the following requirements.

You are legally liable for that debt.
Both you and the lender intend that the debt be repaid.
You and the lender have a true debtor-creditor relationship.

If you are self-employed and file Schedule C to report your business activities, non-mortgage business interest is reported in Part II, Line 16b.

For more information, please see IRS Pub. 535 Business Expenses, Chapter 4.