Simply having a registered business doesn't automatically make something a trade or business for tax purposes. The IRS looks at what the activity is, not just whether you formed an LLC.
- If you are actively running a trade or business (Schedule C activity), interest related to the business is generally deductible on Schedule C and does not require itemizing.
- If the activity is a rental property, that is typically reported on Schedule E and is usually considered a passive activity unless you qualify as a real state professional.
- Rental property is usually passive unless you materially participate, which affects how losses are treated, but it doesn't automatically prevent interest from being deducted.
- It just means losses may be limited depending on income and level of participation.
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