How much tax on net zero income?

Question

I start an S Corp in January and borrow 1 million dollars. By the end of the year I manage to make 1 million dollars and repay the loan pocketing zero dollars. How much tax do I have to pay this year?
Key information from the comments:

Q: if you used the $1 million you made to repay the loan, what
happened to the $1 million you got from the loan itself? You still
have that money (or assets you bought with it), right?
A: I spent the money on salaries. No assets accumulated. Next year I
may have to borrow money again

D Stanley · Accepted Answer

Paying back a loan is not an expense - only the interest would be an expense. The rest would be profit that is taxable.
If you used the $1M profit to pay salaries, and paid back the $1M from the cash that remained, then you'd have zero net income and pay no taxes.

Michael A · Answer

Quoting from this Bankrate article:

Are business loan payments tax deductible?
In short, business loan payments aren’t tax deductible. When a
business loan is received by a company, it’s not included as taxable
income. In turn, when that loan is repaid, you are not able to deduct
loan principal payments. You are simply paying back money you
borrowed, not income spent.
That doesn’t mean that there aren’t deductions you can still make.
Interest paid or accrued on your business loan are tax deductible in
most cases.

So no, you can't deduct payments that go towards paying off the principal of the loan, but you can usually deduct the interest payments. If you have an S-corp and are worried about this, talk to a tax accountant.

How much tax on net zero income?

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