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Old 03-03-2008, 12:55 AM
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Can I write off interest expenses on my personal loan used for my Business?

Dear TaxGuru,

I borrowed funds from my credit cards to finance my business's financial obligations and operations. I still have an unincorporated business and I usually file a Schedule C every year!

Unfortunately, my business did not have the sufficient cashflow to fund the necessary commitments. Since I took a personal loan would I be able to write off the interest expenses? Tks.



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Old 03-04-2008, 10:34 AM
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Can I write off interest expenses on my personal loan used for my Business?

Generally speaking, interest on personal loans such as credit card debt are not deductible on the tax return on schedule A. Only Home Mortgage Interest , Equity Home Interest and Investment Interest expense are deductible(subject to cetain limitations).

However, it seems in your case, a Schedule C Filier, the Interest that was charged to you by the credit cards, appears to be a deductible item on the Schedule C, as the borrowed funds were directly invested into the business, as you say, to support cashflow operations.

So, I would deduct the interest expenses on the Schedule C and keep records to substantiate the fact that the funds were directly deposited into the business operations and that you did not subsequently withdraw these funds!

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