You are correct! Yes, the IRS does allow business owners to deduct interest on loans taken out for business purposes. No, they don't allow double-dipping.
If your LLC is reported on a Schedule C as a sole proprietor, you are what is known as a "disregarded" entity by the IRS. That means you're business is not a separate entity from you for tax purposes. A loan isn't counted as income because it is expected to be paid back, so there is no tax reporting other than the interest expense on the Schedule C, and TurboTax will guide you where to enter this when entering your self-employment income and expenses.
If your LLC is reporting as a separate tax entity on a form 1065 for partnerships, or 1120/1120-S for corporations, that will have different reporting aspects. Ideally, there will be a loan agreement along that reflects the interest rate/amounts, and the shareholder would report it as interest income. The interest rate must be an Applicable rate. Sometimes the IRS may look at these loans as equity, rather than loans and disallow the interest expense.
Hope this helps!
Cindy
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