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

Home Tax Reduction Practice Loan for Real Estate – Can I write off the interest?

  • Avatar Foster 
    Participant
    Status: Physician
    Posts: 17
    Joined: 03/01/2017

    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

    #229691 Reply
    Avatar HumbleInvestor 
    Participant
    Status: Physician, Small Business Owner
    Posts: 147
    Joined: 12/28/2016

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

    #229786 Reply
    Avatar Foster 
    Participant
    Status: Physician
    Posts: 17
    Joined: 03/01/2017

    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

    #230130 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2069
    Joined: 03/01/2018

    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.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #230139 Reply
    Avatar Thedoc2049 
    Participant
    Status: Physician
    Posts: 20
    Joined: 12/09/2017

    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

    #230422 Reply

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