Yes, interest you pay on a personal loan is deductible if the borrowed funds are used for investment purposes, such as the situation you described.
Under IRC guidelines, this would be treated as investment interest expense and is deductible on Schedule A as an itemized deduction, limited to your net investment income. It can't exceed your investment income for the year, but any excess carries forward.
There are some key requirements:
- You must be able to trace the loan proceeds directly to the investment through clear documentation.
- The income you earn must be taxable investment income (not tax-exempt).
- The deduction is only available if you itemize deductions.
For more information, see Publication 550, Investment Income and Expenses
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