Are Small Business Loans Tax Deductible?

Are Small Business Loans Tax Deductible?

Small business loans themselves are not tax deductible, but the interest paid on the loan usually is, if the loan is used for legitimate business expenses.

Deductible expenses may include interest paid on loans used for:

• Equipment purchases
• Business expansion
• Inventory
• Working capital

However, loan principal repayments are not deductible. Also, fines, penalties, or personal use of loan funds may not qualify.

It’s important to keep accurate records and consult a tax professional to ensure compliance with tax laws.