sba borrower paid fees ?

[michele]

New client has sba 504  loan and brought in statement.  She has right at 500.00 per month in borrower paid fees every month. These are added in addition to her principal and interest payment I was trying to find some information on the fees as far as deductibility with no luck.

SBA fee -CSA fee- CDC fee.  I would think they would be deductible as she pays them every month.

Any information greatly appreciated.

Michele

[mjnva]

Recently saw post asking if SBA 504 loan fees paid as part of the monthly payment were deductible. Any response???

[qbteachmt]

You can google:

are sba 504 fees tax deductible

And read for yourself.

"Are SBA guarantee fees tax-deductible? No, SBA guarantee fees are not tax-deductible. Interest you pay on your loan, however, may qualify for a business tax deduction." (Oct 2, 2023)

Link: https://www.nerdwallet.com/article/small-business/sba-guarantee-fee

[TaxGirl3]

Did you see anything authoritative?  

Various articles say they are not deductible, but why wouldn't they be deductible 162(a) expenses?  

[mjnva]

I too read the referenced article yet don't understand why these fees don't meet the 162(a) criteria. Unfortunately I am unable to find tax authority authorizing deduction. These fees are similar to amortized loan costs, which are deductible. Although I came across this explanation "SBA Loan Fees and Taxes and SBA guarantee fees aren't tax-deductible because they transfer the cost of an SBA small business loan from taxpayers to businesses that depend on government funding" I don't agree and still not tax authority derived. And doesn't explain why the payment of these fees aren't "ordinary and necessary expenses."

[qbteachmt]

Typically, fees like this are amortized, not expensed. The SBA has its own authority (CFR) that would likely explain more, but it's another slog to plow through. Also, much of SBA loans are done through lenders as administrators, not directly. Another thought it that the type of expenditure for 504 will already carry tax benefits. It's a whole type of specialization on its own.