2006-11-17 14:10:02 · 5 answers · asked by riveted 2 in Business & Finance ➔ Taxes ➔ United States
No taxes are due, since it's a loan and you have to pay it back. The people who said the interest you pay is deductible are not correct, unless the loan is set up as a mortgage. Personal interest is not deductible. The interest income does have to be claimed, though, by the person who made the loan and collects the interest.
2006-11-17 17:34:55 · answer #1 · answered by Judy 7 · 2⤊ 0⤋
You pay no income tax on money you borrow, because you have to pay it back.
Business Loan: However, if you borrow money and then default (don't pay back), you may be taxed for the "debt forgiveness" as income. You may deduct any interest you are charged. The person/entity who loans you the money must report the interest they receive from you as income on their tax return.
Personal Loan: then you can not deduct the interest you pay, however, the person you borrow from must report the interest they charge you as income on their tax return.
Take care.
2006-11-18 01:05:54 · answer #2 · answered by Chrisusc 2 · 0⤊ 2⤋
I'm no accountant, but I don't think you pay taxes on a loan. Think of it this way - if you take out a home equity loan, you recieve cash using the equity in your home as collateral. That loan isn't reported on your income taxes.
2006-11-17 22:16:03 · answer #3 · answered by Eric S 2 · 0⤊ 0⤋
It's not income, it's a loan. You can deduct the interest you pay to them. They have to pay tax on the interest they earn from you.
2006-11-17 22:12:43 · answer #4 · answered by Papa John 6 · 0⤊ 2⤋
Write it up as a formal loan.
2006-11-17 22:12:50 · answer #5 · answered by Anonymous · 0⤊ 0⤋