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Practice Loan for Real Estate - Can I write off the interest?

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  • Practice Loan for Real Estate - Can I write off the interest?

    Situation:  My practice has a somewhat separate real estate venture.  They basically own the buildings we work in and some other commercial real estate. As a partner I am buying into this venture.  For simplicity sake, lets assume the buy in is $250K. The practice has loaned me the money at 3% interest. It pays an annual distribution that is more than the cost of the interest - which I pay income tax on.

    Over the course of a year I will pay about 3% of 250K this year, or 0.03 * 250,000 = $7500 in interest payments.

    Is there any way I can write off this interest as a business expense?  If so, what would I need to do?  Form some kind of business entity hen claim it as a business expense?  Is that possible?

    What if I formed a LLC (or some other entity) took out a loan from my bank, paid off the practice loan, then claimed the interest I would be paying to the bank as a business expense?

    Any ideas? Thanks

    F

  • #2
    Second one is perfectly legal. I assume there is a way to structure the first one to make it tax efficient for you.

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    • #3
      Thanks for the comment. Anyone else have input on this?  What is the best way to approach this? (apart from just paying it off asap)

      F

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      • #4
        I don’t know the answer to your question. But regarding the bank loan. What kind of rate can you get? Because if you end up with a bank loan of 4 or 5 or more percent that defeats the purpose of overall dollars saved.

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        • #5
          I have a similar situation and was told by my accountant this type of interest cannot be written off - But I am not sure if this correct

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