My friend gave a private loan to someone and is asking can she deduct the principal

[Davie White]

My friend loaned someone money for a real estate deal.  The person does pay her back and she did report the interest income.  But she wanted to know if she can deduct the principal amount that she paid to the person off of her taxes since she has to report the interest as income.  Does anyone know the answer to this question?  Please help

[Matt Devincenzo]

No, the principal isn't an expense because she will be repaid the amount. Think about it, if she somehow could deducted the principal then she would also have to declare it as income when it was repaid later...it isn't an expense it is a loan, the income is the interest and the principal payment is just a return of her own money.