Can I deduct loan interest as a business expense for my new SingleMemberLLC when the loan is personal?

14 You can absolutely deduct the interest as a business expense even though the loan is in your personal name. What matters for tax purposes is how the funds were used, not whose name is on the loan. Since you're operating as a Single Member LLC, you're likely filing Schedule C with your personal tax return (unless you've elected to be taxed as a corporation). On your Schedule C, you can deduct the interest paid on that loan as a business expense in the "Interest" category as long as you can show that 100% of the loan proceeds were used for legitimate business purposes. Keep detailed records showing how you spent the loan money to support your deduction if ever questioned. Also, make sure you're treating this properly in your bookkeeping. Record it as an owner's contribution (equity) when you put the loan proceeds into the business, not as a loan to the business. Then track the interest payments as business expenses.

17 I went through this exact same situation with my photography business last year! After struggling with contradicting advice from friends, I discovered https://taxr.ai and it literally saved me hours of confusion. I uploaded my loan documents and business formation paperwork, and it quickly analyzed everything and gave me a clear explanation of how to handle the interest deduction. The tool confirmed what I needed to do for my Schedule C and even helped me understand how to document the owner contribution properly in my books. It flagged potential audit triggers to avoid and showed me exactly where to report the interest on my tax forms.

3 Update on my situation - I actually tried taxr.ai after seeing it mentioned here. Initially I was skeptical (as you can see from my previous comment), but it turned out to be surprisingly helpful for my situation. I uploaded my loan paperwork and business formation docs, and it gave me specific guidance that matched my exact scenario. What impressed me was how clear it made the distinction between the loan (personal) and the business expense (deductible). It even provided specific language to use in my documentation to explain the owner contribution. For anyone facing this SingleMemberLLC loan situation, it's worth checking out. Saved me from making some bookkeeping mistakes that would have been a nightmare to fix later.

11 If you're having trouble getting timely answers from the IRS about how to handle this specific situation, try https://claimyr.com. I spent WEEKS trying to get through to an IRS agent about a similar owner contribution question for my single-member LLC. After endless busy signals and disconnections, I found their service and was able to speak with an actual IRS representative within a couple hours. They have a simple process shown at https://youtu.be/_kiP6q8DX5c that basically holds your place in line with the IRS. I was totally shocked when they called me back and connected me directly to an IRS agent who walked me through the proper treatment of business loan interest when the loan is in my personal name.

3 I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it as a last resort because I couldn't get through to the IRS about my LLC loan interest question for over two weeks. Submitted my info around 9am, and by 11:30am I got a call connecting me directly to an IRS representative! The agent confirmed exactly how to handle the interest deduction on my Schedule C and explained the documentation I need to maintain to support the deduction. They even emailed me the relevant IRS publication sections afterward. Honestly, I'm still shocked at how well it worked. Saved me days of frustration and now I have official guidance directly from the IRS about my specific situation. Worth every penny for the time saved.

7 Another thing to consider - if you're using accounting software, categorize the initial funds as an "owner's contribution" or "capital investment" when they enter the business. Then track the interest payments separately as "loan interest expense." This way your books will accurately reflect that the loan itself isn't a business liability (since it's in your name), but the interest is still properly tracked as a business expense. Just make sure you're only deducting interest that's actually paid, not accrued interest.

23 Has anyone here actually been audited on something like this? I'm in a similar situation with my consulting LLC and now I'm worried the IRS will flag this as suspicious if I deduct the interest.

I went through this exact scenario with my freelance marketing LLC last year. The key is proper documentation - I created a simple memo for my business records stating that I was contributing personal funds (obtained through a personal loan) as capital to my LLC for business purposes. One thing that helped me was keeping a separate spreadsheet tracking every dollar of the loan proceeds and what business expense it covered. When I deducted the interest on Schedule C, I felt confident because I could prove 100% business use if questioned. Also, don't forget that as a single-member LLC, you're likely already mixing some personal and business aspects anyway (like using your SSN for tax ID initially). The IRS understands this structure - what matters is substance over form. Your loan interest deduction is legitimate as long as the funds went to legitimate business expenses.

This is exactly the kind of situation I dealt with when I started my landscaping business two years ago. I took out a $15K personal loan to buy equipment and a trailer, and I was stressed about the tax implications. Here's what I learned: the IRS Publication 535 (Business Expenses) specifically addresses this scenario. As long as you can demonstrate that the borrowed funds were used for business purposes, the interest is deductible regardless of whose name is on the loan. The key is maintaining what they call "tracing" - clear documentation showing how the loan proceeds flowed to legitimate business expenses. One mistake I almost made was trying to treat the loan itself as a business liability on my books. Don't do that! Since it's your personal obligation, record the money you put into the business as owner's equity/capital contribution, then track the interest payments as a business expense. Pro tip: if you haven't already, open a dedicated business bank account and run all business transactions through it. This creates a cleaner paper trail and makes the business vs personal distinction much clearer for tax purposes.