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.
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From 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
From 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
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/