Are business loans tax deductible?

Typically, when you take out a small business loan, the loaned amount is not tax deductible, but the interest accrued on the capital can be tax deductible. The repayment of a business loan is not counted as income towards your taxes.

This is the best way to trim your business tax obligations and your interest on the money borrowed.

Are business loans tax deductible?

Technically no, a business loan is not tax deductible. But the interest on the loan is a different story. When a business loan is received by a business, it’s not included as taxable income, when that loan is repaid, you are not able to deduct the loan payments. Your business is simply paying back the money you loaned. 

However, you can still make some friendly deductions. Interest paid and/or accrued on your loan is tax deductible in most cases.

Let’s say you took out a business loan and your weekly payments are $500. If $350 of your payment goes to pay the principal, that means you pay $150 in interest on your business loan. That means $150 would be eligible to deduct as a business expense.

The funds also must be spent on something business related, not just kept in the bank account, to be eligible for interest deductions.

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