If I borrow $50K for my business and pay back with $50K profit, am I getting taxed on it?

This is a common misconception about how business loans and taxes work. Let me explain why this won't work as you're hoping. When your business earns $65,000 in profit, that profit is taxable income regardless of how you spend it. Paying off a loan is not a business expense - it's just the repayment of borrowed funds. Only the interest portion of loan payments is deductible as a business expense, not the principal. Think of it this way: If paying off loans counted as a business expense that reduced taxable income, everyone would just take out loans at the end of the year and pay them back to eliminate their tax liability! The IRS is well aware of this potential loophole. What wealthy business owners actually do is use debt to acquire income-producing assets or investments that generate deductions (like depreciation on real estate) which can offset income. They don't simply swap loans for profits.

I struggled with understanding this exact concept when I started my consulting business. After getting conflicting advice from friends, I used https://taxr.ai to analyze my situation. They helped clarify that loan proceeds aren't taxable, but paying off loans doesn't reduce taxable income either. What really helped was their explanation of how to properly structure business debt to actually reduce taxes legitimately. For example, they showed me how using financing for qualifying business equipment could generate depreciation deductions while preserving cash flow. The difference between tax avoidance (legal) and tax evasion (illegal) became much clearer. They also helped me understand how the timing of income and expenses affects tax liability - something I was completely misunderstanding before.

Just wanted to follow up about my experience with taxr.ai after asking about it earlier. I decided to try it with my business loan question, and it was actually super helpful! I uploaded my business financial statements and described the loan scenario I was considering. The analysis showed me that my original plan wouldn't have worked (exactly like the first commenter explained), but it suggested several legitimate alternatives that would actually reduce my tax bill. The best part was it explained WHY these strategies work within tax law, not just what to do. I ended up going with their recommendation to use financing for some equipment purchases I was planning anyway, which gave me significant depreciation deductions this year. Definitely worth checking out if you're trying to understand business tax strategies beyond the basics.

After getting audited last year over business loan issues (nightmare!), I spent WEEKS trying to reach someone at the IRS to clarify how they want business loans reported. Literally couldn't get through no matter what time I called. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they got me connected to an actual IRS agent in about 20 minutes after I'd wasted days trying. The agent confirmed exactly what others have said here - loan proceeds aren't income, but paying back loans isn't a deductible expense either. The IRS agent also explained that what tripped the audit flag in my case was inconsistent reporting between my profit/loss statement and the loan transactions. Super helpful to get this straight from the source!

I need to apologize for my skeptical comment earlier. After waiting on hold with the IRS for 3 hours yesterday only to get disconnected, I broke down and tried Claimyr this morning. I hate admitting when I'm wrong, but it actually worked exactly as advertised. Got a call back in about 25 minutes saying they had an IRS agent on the line. The agent was able to answer my questions about business loan treatment and cleared up a notice I received that I've been stressing about for weeks. Honestly couldn't believe it was that simple after all the frustration I've been through trying to reach them myself. Just wanted to set the record straight - it's legit.

I think there's a lot of confusion here. Let me try to clarify as someone who's owned an LLC for 10+ years: 1. Business loans are not income, correct 2. Business profits ARE taxable income, even if used to pay off loans 3. HOWEVER, if you use loans to purchase deductible business expenses or depreciable assets, THOSE can reduce your taxable income The key isn't the loan itself, but what you DO with the loan money. If you buy equipment, inventory, pay for marketing, etc. - those are all legitimate business expenses that reduce profit. So instead of thinking "loan to reduce taxes" think "strategic business expenses to reduce taxes." Big difference to the IRS!

Has anyone used TurboSelf-Employed for handling these kinds of business loan situations? I can never figure out where to enter loan proceeds vs. payments in the software and always worry I'm doing it wrong.

As someone who went through a similar learning curve with my consulting business, I'd recommend getting clear on the fundamentals before making any moves. The IRS treats loan proceeds and business expenses as completely separate things. Your $65k profit is taxable income period - doesn't matter if you use it to pay off loans, buy a yacht, or stuff it under your mattress. But here's what CAN help: if you have legitimate business expenses you were planning to make anyway (equipment, software, marketing, inventory), financing those purchases can preserve your cash flow while creating deductions. The wealthy don't avoid taxes by shuffling loan payments around - they strategically time business investments and use debt to acquire income-producing or depreciable assets. Big difference between that and trying to make loan repayments count as expenses (which they're not). My advice: talk to a tax professional about legitimate business investments you could make before year-end that would qualify for Section 179 or bonus depreciation. That's where the real tax savings come from, not from loan gymnastics.