Note investing tax question

[Joshua Scott]

Good morning all. What is taxable in note income and what is tax deductible? Trying to figure out taxes for my business and how to list it in my ledger. Thanks.

[Bob Norton]

@Joshua Scott The purchase of the note is an investment, so you should show it on your balance sheet as an asset.  The payments you receive have two components, interest and principal.  The interest from the note is taxable income and you should show it on your income statement.  The principal you receive reduces your investment on the balance sheet, as it is a return of capital and not taxable.