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I started my S corp and funded with X dollar amount with…

I started my S corp...
I started my S corp and funded with X dollar amount with agreement to pay back loan plus interest on monthly basis. my tax question is can I deduct monthly payment as expense?
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3/14/2018
Brian Michels
Brian Michels, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 207
Experience: Partner at Michels & Hanley CPAs, LLP
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Hello. My name is ***** ***** I'll be the Expert assisting you today. I am a licensed CPA. I look forward to helping you with your issue today. The interest associated with the loan is treated as a business deduction however the interest income you receive personally is interest income. A Form 1099 must be issued from the business to you personally at the end of the year indicating the total interest paid to you.

I hope I’ve provided the information you were seeking. If you are happy with my service, your 5-star rating at this time is most welcome. If you need more help, please let me know so l can continue to assist you.

Brian Michels
Brian Michels, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 207
Experience: Partner at Michels & Hanley CPAs, LLP
Verified
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Customer reply replied 4 months ago
Ok thanks for the interest part. Is monthly payment toward capital of loan also treated as a business deduction?

No. The monthly principal payment is a reduction in the loan balance. If you gave a loan to the corporation you would debit cash and credit loan payable. When you make payments you will credit cash and debit the loan balance for the principal portion and debit interest expense for the interest portion.

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Customer reply replied 4 months ago
awesome, so The monthly principal payment is a reduction in the loan balance. but it should NOT be the income on Schedule K-1, correct?

Correct. Its a debt repayment and not income or expense to business or shareholder. only the interest expense is included as a business deduction (and income to the recipient).

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