Any payment of principal is simply repaying money that was borrowed (not taxed to you when received, and not deductible
to the lender when lent).
BECAUSE it was a loan ... to be paid back.
The INTEREST, as you have mentioned, IS deductible by you (and taxable as interest income
to the lender).
Title 26 of the US
code (called the Internal Revenue Code
anecdotally) only taxes net increases in wealth. For example, if you borrowed money and DID NOT pay it back, this becomes taxable as income to and THEN a write-off as a bad debt to the lender.
There IS no tax law that says repayment of principal is not taxable. The code doesn't work that way. The code simply says that all increases in net wealth ARE taxable, and lists many of them by defining gross income
- selling something for more than you have invested in it, bartering gains - trading a $2,000 motorcycle for a $10,000 car, gambling winnings, earned income
and interest income, rental income, etc., etc.)
But the only time PRINCIPAL in a loan is taxed is when it is NOT repaid.
Let me know if you have questions ...