Hard Money Loan in Houston: Is the Interest Tax Deductible?

calculator and tax documents to help deduct interest paid for your hard money loan in Houston

A hard money loan in Houston can help you acquire and rehabilitate commercial properties. Investors and organizations who use hard money for land purchases and renovations often wonder if there are any tax benefits of choosing hard money loans. Of course, you should always check with your tax professional for specifics, but often the interest for your loan is deductible. 

Is Interest from a Hard Money Loan in Houston Tax Deductible?

calculator and tax documents to help deduct interest paid for your hard money loan in Houston
In most cases you can deduct interest paid for a hard money loan in Houston from your taxes, but talk to a tax professional to confirm.

So, is hard money loan interest deductible on taxes? Like most financial matters, the answer is a little more complex than a simple yes or no. Generally, loan interest paid is deductible on taxes, but you must meet certain criteria. 

Often, if you’re taking out a hard money loan in Houston, it’s likely considered a business expense. Most commercial real estate investors act under a business organization, such as an LLC or a corporation. Many others who seek hard money loans are businesses looking to purchase land to build a new location. Therefore, we’re going to primarily discuss paid interest as a business expense. 

According to the Small Business Association, there are five basic rules on deducting interest payments for business loans. Typically, if you are taking out a loan for your business where you’re going to pay the lender interest, you are able to deduct that interest as a business expense. 

This generally means the money comes from a real lender, not your friends or family. You must also be legally liable for paying back the debt. So, since hard money loans typically come from an experienced private money lender in Houston, this helps you satisfy this criteria. 

In addition, you typically must spend the money, not let it sit in an account somewhere. If you need a hard money loan in Houston, you’re probably going to use it ASAP to buy land or begin your property rehab. Just keep in mind that if the money sits unused in an account, the interest paid may be considered a business investment, rather than an expense. Therefore, you may not be able to deduct it on your taxes. Once again, we recommend talking to a tax expert about your specific circumstances. 

Benefits of Hard Money 

A hard money loan in Houston can help you finance real estate investments quickly. Some of the most common borrowers for hard money loans are real estate investors who must act fast to snap up great opportunities. They are also popular among individuals and organizations with poor credit history. 

Because these are collateral loans in Houston, lenders can provide loans for borrowers with less-than-stellar credit histories or for distressed properties in need of major renovations. They provide an attractive alternative to traditional real estate loans. 

Texas Funding – Your Private Money Lender in Houston

Getting funding for real estate is simple with our team at Texas Funding. We are a private money lender in Houston offering hard money loans tailored to your needs. Our team works with you to get funding in just days with minimal paperwork for your real estate investment. Get in touch today to get funding