Question about interest deduction for New Vehicle Purchase

[HisRoyalTaxiness]

I purchased a used car from a private party seller.

I borrowed $10,000 from a friend to make the car purchase, under the agreement, I would repay him $12,000.  Those debts are resolved.  Is the $2000 in interest paid on the $10,000 loan deductible / claimable or does such a deduction only apply to loans furnished by a licensed lender or finance company?

[SusanY1]

There is no requirement that interest is only deductible when loans are furnished by a licensed lender or finance company.   

The lender may have a requirement to report the interest as interest income, but whether or not it is deductible depends on the vehicle's use.  Is this a business use or personal use only vehicle?  Or some combination of the two? 

[HisRoyalTaxiness]

Thanks for the prompt reply.  The vehicle use is about 80% business 20% personal.

[SusanY1]

If you are calculating your business vehicle expense using the standard mileage rate, there is no additional deduction for intererst paid.  If you are deducting actual expenses, then business use percentage of the interest paid is an expense in the year that it is paid.  If the loan term extended beyond a year, the interest must be amortized across the life of the loan.   (This assumes also that the vehicle was used for business in that year.) 

[Mike9241]

@SusanY1 matbe that should be about 80% in the year paid, the business % use of the vehicle. 

@HisRoyalTaxiness hope you have records to support the business use. if not, and your are audited, the IRS would have the right to deny any deduction for the vehicle.