April 20, 2009, 2:57 pm

Starting a biz: What you can write off

You don't get a tax break on money you borrow – but the interest you pay on your loans is fair game for deduction.

Bryanne Goetz, Orlando
I started a business from home this year. Can I write off the money that was loaned to me to start the company?


By Lenora Chu, CNNMoney.com contributor
You cannot write off money that was loaned to you. However, you can deduct the interest that you pay on the loan, says Martin Chan, a CPA of Philadelphia.

You can also claim any business expenses that may have been covered by the loan, such as office supplies and utilities, says Fullerton, Ca.-based CPA John Stoller.

In order to qualify as a tax deduction, these expenses must be considered both “ordinary” and “necessary,” says Chan. In other words, they must be common and accepted in your industry, and also helpful and appropriate to your business.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

My business failed. What can I write off?

Write-offs for work travel

Enterprise zones yield lucrative tax breaks

Your Answers
AFrom Noah Gordon, Tucson, AZ

You cannot write off the money received from the loan and that is usually not considered business income. However, you can deduct the principle and interest paid on the loan during the loan period, this is confirmed in an article at Loan.com (http://www.loan.com/business-loans/business-loan-finance-what-to-do-when-you-file-taxes.html): “Business loans are treated as an expense, allowing the business to deduct the principal and interest on the loan during the loan period.” Principle and interest paid on a loan during the loan period is considered a business expense.

In order to take advantage of the deduction you must report the total amount of the loan. This deduction allows you to decrease your taxable income. The borrower of the business loan will get a 1099-INT from the lender and must give this to their accountant for inclusion in their tax forms.

Noah
http://www.flowersrieger.com/

Posted By Noah Gordon, Tucson, AZ : November 14, 2009 9:52 pm
AFrom ilya bodner

Make sure to first consider how you obtained financing for this business. In other words, if you used personal collateral then it may be harder to make the connection.

This is why small business owners are often encouraged to keep personal and business credit/finances separate.

Sincerely,

Ilya Bodner
Small Business Owner
Initial Underwriting Group

Posted By ilya bodner : June 7, 2009 4:17 pm
AFrom Alex N

While a loan is not something you can write off – you can write off almost all the expenses that your business incurs in the course of its daily operations and yes of course the interest that you pay on that loan! Save those receipts!

Alex N
http://www.smallbusinessplanresources.com

Posted By Alex N : April 22, 2009 11:09 pm
CNNMoney.com Comment Policy: CNNMoney.com encourages you to add a comment to this discussion. You may not post any unlawful, threatening, libelous, defamatory, obscene, pornographic or other material that would violate the law. Please note that CNNMoney.com may edit comments for clarity or to keep out questionable or off-topic material. All comments should be relevant to the post and remain respectful of other authors and commenters. By submitting your comment, you hereby give CNNMoney.com the right, but not the obligation, to post, air, edit, exhibit, telecast, cablecast, webcast, re-use, publish, reproduce, use, license, print, distribute or otherwise use your comment(s) and accompanying personal identifying information via all forms of media now known or hereafter devised, worldwide, in perpetuity. CNNMoney.com Privacy Statement.
  • terrafugia.04.jpg
    Entrepreneurs have dreamed of sky cars for 80 years.  More
  • wireless_elec.04.jpg
    Wireless electricity and invisible speakers -- see what's coming in 2010.  More
  • plushpod_new.04.jpg
    These 6 businesses took advantage of crashed real estate prices to trade up. More
  • pile_money.ju.04.jpg
    Small business grants are rare, but they do exist. Here's how to find them. More
  • ann_marie.04.jpg
    These 7 entrepreneurs are bringing tech, medical research and design jobs to the Detroit metro area. More
  • credit_cards.04.jpg
    As traditional loans dry up, banks are funneling more of their small business lending through credit cards. More
  • frattini_dfd_26.04.jpg
    Arson. Scrappers. Blackouts. It's part of business for the last tenant in Detroit's Packard Plant. More



QWe've run a dinner theater for three decades. We've been operating at a loss for the last couple of years, and are unable to get a loan. We even closed for two months this summer to save money. We don't know what to do. More
Get Answer
- Kyle, Sarasota, Fla.
Sponsors
© 2009 Cable News Network. A Time Warner Company. All Rights Reserved. Terms under which this service is provided to you. Privacy Policy. Advertising Practices.
Copyright © 2009 BigCharts.com Inc. All rights reserved. Please see our Terms of Use.
MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch, Inc.
Intraday data provided by Interactive Data Real-Time Services and subject to the Terms of Use.
Intraday data is at least 20-minutes delayed. All times are ET.
Historical, current end-of-day data, and splits data provided by Interactive Data Pricing and Reference Data.
Fundamental data provided by Morningstar, Inc..
SEC Filings data provided by Edgar Online Inc..
Earnings data provided by FactSet CallStreet, LLC.
Powered by WordPress.com.