Editor's choice: First Down Funding business loans
- Works with bad credit and most industries
- Only 100 days in business required
- No credit check
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
Your business is getting off the ground or expanding, and you need the financing to back it up. But how does that financing affect your already complicated taxes? Explore the differences between a business and personal tax return, what counts as taxable income and what to deduct as business expenses.
Not usually. In fact, most loans are generally not considered taxable income because it’s money that you’re paying back. While there are exceptions, those exceptions apply to loans that are different from typical business loans from banks or online lenders.
The main exception is if some or all of your debt is forgiven, the amount that gets forgiven becomes taxable income. So even though you didn’t pay taxes on it when you received the funds, the act of forgiveness changes it from a loan to income.
The short answer is yes. You can typically deduct interest paid on business loans used solely for business purposes. Specific situations may arise in which the entirety of the amount borrowed isn’t used for business expenses. In these cases, interest paid on the amount used for personal purchases isn’t deductible.
Partially. A full loan repayment isn’t considered a business expense because the principal amount — the amount borrowed outside of interest — isn’t a cost to your business. It’s simply money you received and then paid back. However, the interest is considered deductible because it isn’t part of the original amount borrowed.
The shift from filing personal taxes to filing business taxes can be a shock the first time around. A variety of different forms can apply depending on whether you’re considered a C or S corporation, a general partnership owner or a nonprofit. If you’re a sole proprietor, the process is slightly more distilled to reporting your earnings on your 1040.
Sole proprietor or otherwise, you’ll need to keep track of additional deadlines. Tax deadlines are among the biggest ones to watch for. Even if you’re owed a return at the end of the year, estimated taxes that have gone unpaid come with a penalty.
Looking for more deductions. Consult a tax specialist to find out if your business could qualify for one of the following deductions.
A lot can happen over a year, especially if your business is young. You may even find that you don’t have all of the funds needed to cover your taxes owed. Should you owe money to the IRS that you can’t immediately repay, you can take a few steps to minimize the financial impact it has on your business.
Your first option is to contact the IRS directly. You may be able to set up a payment plan, which can reduce or eliminate possible penalties that come with not paying the owed amount.
You may also be able to take out a tax debt loan. Tax loans can reduce the likelihood of you becoming personally liable for your business’s debts — and, importantly, help you avoid penalties. In some cases, lenders even help you by providing a specialist to navigate the IRS.
Business loans can be useful tools for creating cash flow, buying equipment and maintaining supplies. When you’re paying one off, you can likely deduct the interest you pay from your taxes.
There are always exceptions when it comes to taxes. So you may want to consult with a tax professional if you’re unsure about the validity of a deduction.
Compare 6 lenders offering loans that you can qualify for with a credit score under 580.
If your hospital already borrowed, consider these alternatives before payments are due.
American Debt Relief can save customers around 30% of the debt they enroll. But there are a few red flags.
Witches, warlocks, and werewolves – oh my! 7 scary financial facts and stats to be aware of so you can let the ghoul times roll, minus the debt stress.
While the SBA is now processing PPP loan forgiveness applications, many lenders have yet to start working through their backlog.
Depending on whether you go the DIY route or hire lawyers, it may cost you a few hundred to thousands of dollars.
Developing a long-term relationship with your local banker can be a great investment for your business.
This debt settlement company accepts balances as low as $5,000 with typical savings 25% to a high 32% of your enrolled debt.
Disability insurance typically pays out between 40% and 80% of your income, but will depend on the type of policy you have.
With landfall expected Friday, know what your current policy covers and how to get federal government disaster relief.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.