Is interest tax deductible on margin loans for business expenses?

September 10, 2004


Subject:  margin loan interest
From:  D. Helm
Date:  Fri, 06 Aug 2004

We used a margin loan for personal living expenses while getting a business established. Is the interest tax deductible?

Thanks,
D. Helm

Answer

Date:  Wed, 01 Sep 2004

Hi D.,

Interest paid to any source (other than certain home equity loans) where the loan was used to pay personal living expenses is not tax deductible. However, the tracing rules are fairly liberal, so you might be able to "trace" the loan proceeds to business expenditures. Consult with a tax advisor.

Good luck!

Mike Gray

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

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