Interest Interest is the amount charged for the use of borrowed money. Youcan generally deduct on Schedule C or C-EZ all interest you payor accrue during the tax year on debts related to your business.Interest relates to your business if you use the proceeds of the loanfor a business expense. It does not matter what type of propertysecures the loan. You can deduct interest on a debt only if you meetall of the following requirements. You are legally liable for that debt. Both you and the lender intend that the debt berepaid. You and the lender have a true debtor-creditorrelationship. You cannot deduct on Schedule C or C-EZ the interest you paidon personal loans. If a loan is part business and part personal, youmust divide the interest between the personal part and the businesspart. Example.In 1999, you paid $600 interest on a car loan. During 1999, youused the car 60% for business and 40% for personal purposes. You areclaiming actual expenses on the car. You can only deduct $360 (60% of$600) for 1999 on Schedule C or C-EZ. The remaining interest of$240 is a nondeductible personal expense. More information.For more information about deducting interest, see chapter 8 inPublication 535,Business Expenses. That chapter explainsthe following items. Interest you can deduct. Interest you cannot deduct. How to allocate interest between personal and businessuse. Reading hotel roomsWhen to deduct interest. The rules for a below-market interest rate loan. (This is aloan on which no interest is charged or on which interest is chargedat a rate below the applicable federal rate.)