Can I Use a Personal Loan to Reduce My Income Taxes? Tax Deductibility Question

But what if I use the personal loan to invest in my small business and then claim it as a business expense? Would the interest be deductible then?

If you use the loan proceeds directly for business purposes, then it would be considered a business loan, and the interest could potentially be deductible as a business expense. However, you need proper documentation showing the loan was used exclusively for legitimate business purposes. For small business owners, keeping clear separation between personal and business finances is crucial. If you're considering this approach, I'd recommend setting up a separate business bank account, depositing the loan there, and using it only for documented business expenses. The IRS looks carefully at these arrangements, especially with sole proprietorships.

Does it work with loans you already have or only new ones you're thinking about taking out? I'm wondering if I've been missing deductions on my existing loans.

Sounds interesting but how accurate is it really? I've had tax software give me incorrect information before and ended up with an audit. Does this thing actually know all the nuances of tax law?

It works great with existing loans! You just upload your loan statements and it analyzes them to see if any portion qualifies for deductions you might have missed. I uploaded statements from loans I took 3 years ago and found I could amend returns to get some money back. As for accuracy, it's been spot-on for me and my situation. The difference is it's specifically focused on loan documentation analysis rather than being general tax software. It cites the specific IRS codes and regulations that apply to your situation so you can double-check everything.

Wait, how exactly does this work? Do they just call the IRS for you? Why would that be any faster than me calling myself?

Sorry but this sounds like BS. Nobody gets through to the IRS in 20 minutes. I've literally waited on hold for 3+ hours multiple times only to get disconnected. I'll believe it when I see it.

They use a system that navigates the IRS phone tree and waits on hold for you. When an agent picks up, you get a call connecting you directly to that agent. So instead of you personally waiting on hold for hours, their system does it and only calls you when there's an actual human ready to talk. The reason it's faster is they have technology that keeps dialing and navigating the system constantly, finding the optimal times to call and which menu options have shorter wait times. I was absolutely shocked when it worked because I had tried calling for days with no luck.

Thanks for the suggestions! I do max out my 401k already, but I hadn't thought about an HSA. My employer offers a high-deductible health plan option - would that automatically qualify me for an HSA?

Yes, if your employer offers a qualified high-deductible health plan (HDHP), that would generally make you eligible for an HSA. For 2025, you can contribute up to $4,150 for individual coverage or $8,300 for family coverage, plus an extra $1,000 if you're 55 or older. The beauty of HSAs is the triple tax advantage - tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Unlike FSAs, the money rolls over year to year, and you can even invest it for long-term growth. Many people don't realize you can use it as a stealth retirement account by saving receipts for medical expenses now and reimbursing yourself years later.

Isn't there also something about investment property loans being tax-advantaged? My cousin claims he deducts all his mortgage interest on his rental properties.