 TITLE: Do You Have to Pay Income Taxes on Personal Loans? CONTENT: Are Personal Loans Tax Deductible?\n----------------------------------\nYou can't deduct the interest you pay on your personal loan unless you use the money for a few specific reasons and meet the corresponding eligibility requirements.\nOne is when you use some or all of the money for a business expense. You may then be able to deduct the corresponding amount of interest payments from your business income. But make sure the lender allows you to take out a loan for business use (some do, others don't), and keep records of how you spend the money.\nAnother exception could be if you take out a personal loan and use all the money to pay for qualified educational expenses for yourself, a spouse or a dependent. Or, if you refinance a student loan with a personal loan. In these cases, you might qualify to deduct up to $2,500 in interest payments annually.\nBut again, check with the lender to see if it offers personal loans for educational expenses, and compare personal loan offers to actual student loans. Most people take out student loans because they offer lower interest rates and are eligible for special forgiveness and repayment programs.\nThere's also an itemized deduction for investment interest if you borrow money to purchase investments that aren't tax exempt. For example, if you take out a loan to buy stocks, you may be able to deduct the loan's interest. You can only deduct up to the amount of investment income you had for the year, but you can roll over additional amounts to offset future years' investment income. END