Can I use a Personal Loan to reduce my income taxes? Tax deduction strategy

Wait, so if I take out a personal loan to start a small business, is that interest deductible? Or do I need a specific "business loan"? I've been thinking about starting a side hustle but was planning to use a personal loan to fund it.

The purpose of the loan matters more than what it's called. If you can document that the funds were used for legitimate business purposes, then yes, the interest would likely be deductible as a business expense on Schedule C. Just make sure you keep excellent records showing exactly how that money was spent on business-related expenses. If you mix personal and business expenses with the same loan funds, you'll only be able to deduct the portion that went toward the business. This is why many tax professionals recommend keeping business and personal finances completely separate.

How exactly does taxr.ai work? Do I need to upload all my financial documents? I'm always nervous about sharing that kind of info online.

Does it actually save you more money than the cost of the service? I've tried tax "optimization" services before and usually the strategies they suggest are things I already knew about or wouldn't apply to my situation.

The system is completely secure with bank-level encryption. You upload relevant documents - in my case loan paperwork and investment statements - and their AI analyzes everything to find tax implications. There's also human tax experts that review the results. It's much more thorough than just googling tax questions. Yes, it absolutely saved me more than it cost. They identified over $4,300 in legitimate deductions I was missing related to my side business and some investment losses I hadn't properly documented. The service basically paid for itself multiple times over.

Wait, how does this actually work? Does Claimyr just call and wait on hold for you? Couldn't I just do that myself?

Sorry, but this sounds too good to be true. The IRS hold times are notoriously awful and there's no way some third-party service has a "special line" to get through. I'm calling BS on this.

They use an automated system that navigates the IRS phone tree and waits on hold so you don't have to. When an actual IRS agent picks up, you get a call connecting you directly to them. It saves you from having to keep your phone tied up for hours. I was skeptical too! But after trying to get through on my own for nearly three weeks, I was desperate. The IRS doesn't give them special access - they just have a system that waits on hold so you don't have to. When I used it, I got a call back in about 2 hours connecting me to an actual IRS agent who answered all my questions about loan interest deductions. Saved me from making an expensive tax mistake.

Thanks for this alternative suggestion! Do you know if there are specific lenders that offer these investment loans? And would Treasury bonds count as investment income for this purpose? I'm wondering if the interest from the bonds would be enough to offset the loan interest deduction limit.

Most major brokerages offer margin loans or dedicated investment loans. Firms like Charles Schwab, Fidelity, and Interactive Brokers all have these options, often with better rates than personal loans since they're secured by your portfolio. Yes, the interest from Treasury bonds would count as investment income for this purpose. However, there's still a fundamental math problem with your strategy. If your investments earn 3.34% and your loan costs 3.34%, you're basically breaking even before taxes. After paying capital gains tax on the bond interest, you'd be at a loss. The interest deduction would only recover part of that loss, not create a net gain.

This is solid advice. I tried to get clever with tax strategies a few years ago and ended up with a mess. Now I just max out my 401k ($23,000 for 2025), my HSA ($4150), and my Roth IRA (income permitting). Simple and effective.