Hello, I have borrowed money from a friend and I would be paying him back with interest. Do I have to report this on my taxes or any other forms? I am not sure if this would be relevant info but I am a resident of California. Thanks in advance.
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Do I Have To Report A Personal Loan On My Tax? I borrowed money from a friend and would like to know
#2
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Posted 10 January 2009 - 03:43 PM
Well, was it loan, but not really a "loan" in the sense of its technicality and amount?
Regardless, I wouldn't report a personal loan from a friend in my taxes. Since it's not really income or tax-deductible (at least, the interests paid I think), I wouldn't worry unless the sum of the loan was large (or there were some other technicalities in the agreement or contractual terms). If such is the case, I would consult with a friend who has this kind of knowledge of accountancy or research online. I'm sure you can find the answer somewhere.
Regardless, I wouldn't report a personal loan from a friend in my taxes. Since it's not really income or tax-deductible (at least, the interests paid I think), I wouldn't worry unless the sum of the loan was large (or there were some other technicalities in the agreement or contractual terms). If such is the case, I would consult with a friend who has this kind of knowledge of accountancy or research online. I'm sure you can find the answer somewhere.
metallurgy
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Posted 10 January 2009 - 04:00 PM
QUOTE (cavil. @ Jan 10 2009, 03:43 PM) <{POST_SNAPBACK}>
Well, was it loan, but not really a "loan" in the sense of its technicality and amount?
Regardless, I wouldn't report a personal loan from a friend in my taxes. Since it's not really income or tax-deductible (at least, the interests paid I think), I wouldn't worry unless the sum of the loan was large (or there were some other technicalities in the agreement or contractual terms). If such is the case, I would consult with a friend who has this kind of knowledge of accountancy or research online. I'm sure you can find the answer somewhere.
Regardless, I wouldn't report a personal loan from a friend in my taxes. Since it's not really income or tax-deductible (at least, the interests paid I think), I wouldn't worry unless the sum of the loan was large (or there were some other technicalities in the agreement or contractual terms). If such is the case, I would consult with a friend who has this kind of knowledge of accountancy or research online. I'm sure you can find the answer somewhere.
Hi there, actually I did search online about this matter and I had contradictory sources. I was wondering if anyone whos familiar with taxes could answer this Q.
#4
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Posted 10 January 2009 - 04:07 PM
What are you trying to report? The principal you received? The interest you're going to pay out? The principal you're going to pay out? Both?
#5
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Posted 10 January 2009 - 08:02 PM
You don't report a loan that you received as income unless you don't intend to pay it back.
Generally, interest that you pay on a loan is deductible only if it is a secured by your house (a mortgage), if it is a business loan or if it's used to generate investment income. You have to itemize your deductions in order to take the interest deduction which might not be advantageous, depending on your total itemized deductions compared to the standard deduction.
If your loan falls into one of the three categories above, you should have evidence that it's a loan in the form of a signed note that specifies the date the loan was made, the payor and payee, the amount, the terms of repayment, and the interest rate.
Sound confusing? Nothing is simple in the tax code...
Generally, interest that you pay on a loan is deductible only if it is a secured by your house (a mortgage), if it is a business loan or if it's used to generate investment income. You have to itemize your deductions in order to take the interest deduction which might not be advantageous, depending on your total itemized deductions compared to the standard deduction.
If your loan falls into one of the three categories above, you should have evidence that it's a loan in the form of a signed note that specifies the date the loan was made, the payor and payee, the amount, the terms of repayment, and the interest rate.
Sound confusing? Nothing is simple in the tax code...
#6
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Posted 11 January 2009 - 01:15 AM
Thanks for the great inputs! My intention is to just be clean about it so that the personal loan issue won't be any trouble if somehow the IRS people finds out about it in some way. I will be paying back a lump sum of $10K to my friend with fair market interest. What I was wondering was if there were any obligations on my side to report the loan so that I won't be tied to any legal matters later on, if there is any.
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