Do personal loans affect your tax return?

Personal loans do not affect your tax return in most cases. The only reason personal loans typically affect tax returns is if the borrower qualifies for a tax deduction of the interest they pay. There are a few reasons why personal loan interest might be tax deductible, and three of the most common are when the personal loan was used to fund higher education expenses, to fund a business, or to buy investments. But it’s important to know that personal loan proceeds aren’t considered income, and do not need to be reported on your tax return.