John and Beth Harris start a LLC. John has an HELOC of $150,000 under his name secured by their main home. He has not taken out any proceed from the HELOC yet and now he wants to take the entire proceed out and use it for their new LLC for business use only.
In this situation, how does John report the interest expense of borrowing the HELOC as a business interest expense? Can John just take out the $150,000 proceed and transfer the amount to the LL;s account, and then let the LLC make the monthly payment from its account and deduct the interest as a business interest expense on schedule C?
Deducting the interest expense on schedule C is correct if the LLC is being taxed as a soleproprietorship. I would suggest filing a UCC form with the state for documentation and asset protection purposes.
The choice of funding for your business can be an excellent opportunity to withdraw revenues from your business without paying payroll taxes. A tax plan would be well worth the money. If you do not properly document your intentions when the funding is done you cannot go back and redo it later. This could cost thousands in unnecessary taxes being paid.
Deducting the interest expense on schedule C is correct if the LLC is being taxed as a soleproprietorship. I would suggest filing a UCC form with the state for documentation and asset protection purposes. The choice of funding for your business can be an excellent opportunity to withdraw revenues from your business without paying payroll taxes. A tax plan would be well worth the money. If you do not properly document your intentions when the funding is done you cannot go back and redo it later. This could cost thousands in unnecessary taxes being paid.
Thank you very much, John, for your reply. A UCC filling has been done, the said LLC is a domestic LLC now. I shouldn't mention the schedule C, and am sorry for the confusion.
Now, how does John Harris do in order to deduct the interest expense of borrowing the HELOC as a business interest expense? What should he do to properly document his intentions for the funding?
Thank you again and I much appreciate your kind help.
jbeidle | Contributor | 7/27/2009 - 4:36 pm
tracey | Window Shopper | 7/27/2009 - 5:26 pm
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