accounting practice - recording personal loan to business

[Tim M.]

Hello all - First just want to thank everyone on BP for all the incredible info and knowledge - this is an amazing site!
I recently purchased a 4 unit rental. I took out a HELOC on my primary for the downpayment (3.75% 15 year = unreal!). I use Quickbooks and do my own accounting. This is basically a loan to the business, the business would pay me back within 3.5 years. However, since the loan is on my personal residence I would be getting a 1099 int from the HELOC towards my primary, and would deduct that interest on my personal return. I'm guessing I can not also deduct that loan interest in the business's P&L? I suppose I could charge the business ADDITIONAL interest and deduct that in P&L but thats just robbing from peter to give to paul - I'm a sole proprieter. Am I thinking correctly here? So do I just record this as a personal loan to the business as a LT liability, no interest charged? Essentially the transaction wouldn't even show up on the P&L, only the balance sheet. Also, is this actually a LT liability (3.5 yrs)? Any way to show the principal payments as expenses in P&L? Any insight or suggestions would be greatly appreciated. Specifically from Steven Hamilton - I'm a long time stalker... I mean watcher of your posts.

[Steven Hamilton II]

Tim,

There is an easy solution to this. Because the loan was not used to improve your primary residence, you can only deduct it against the rental property. You can only deduct your interest once as a key point to remember.

So your primary mortgage would be deductible on Schedule A. Your HELOC interest paid will be deducted on Schedule E which is where you will show your rental income and your rental expenses. Do not forget your depreciation on your tax return either.