Only the interest part. Each loan payment usually mixes principal and interest. The interest on a debt used for your business is generally deductible, if you are legally liable for the debt and you and the lender intend it to be repaid. Repaying the principal, the amount you borrowed, is not a deductible expense. IRS Publication 334 (2025) sets out the interest rules. ProfitDrawer's free loan payoff calculator shows how much interest a loan costs in total.
How to record it: use your loan statement to see how much of each payment was interest. Record the interest as a business expense, and the principal as a reduction of the loan balance.
Rules from IRS Publication 334 (2025):
- Interest relates to your business if you use the loan proceeds for a business expense. The type of property securing the loan does not matter.
- You and the lender must have a true debtor and creditor relationship.
- If a loan is part business and part personal, divide the interest between the two. Interest on personal loans cannot go on Schedule C.
- Car loans: if you are self-employed and use the vehicle in your business, deduct the business-use share of the interest. The IRS example: $600 of interest in 2025 with 60% business use gives a $360 Schedule C deduction.
- Some businesses must limit business interest expense under the Form 8990 rules.
The things you buy with the loan follow their own rules, for example depreciation for equipment. General information, not tax advice.
Source: IRS Publication 334 (2025), Tax Guide for Small Business · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.