I'm a small business owner. I owe my father $25,000 and I want to pay him 10% of what I bring in to pay back this loan. It will be around $15,000 per year. Does anyone know how I can make this money a deduction on my taxes without him having to pay taxes on it?
2007-06-29 15:43:11 · 3 answers · asked by vreels man 3 in Business & Finance ➔ Taxes ➔ Other - Taxes
Write up the loan document for the original amount borrowed. returning the principal is not taxed. Only the interest portion is taxed.
2007-06-29 15:46:21 · answer #1 · answered by PersonalFreedom 4 · 1⤊ 0⤋
The money he loaned you is not income to your or your business. You do not pay any taxes on it.
The payments you make to him are simply repayment of a loan. Part of it is interest and part is return of principal.
The interest that you pay him IS taxable income to him and is a business deduction for you. There's no way around that.
The principal you pay back is not income to him and is not deductible by you.
2007-06-30 13:26:11 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
Return of principle is not taxable for him, only what you pay to him in interest. And at the rate you are planning to pay him back, it really should not impact his taxes much at all, if any.
2007-06-29 22:57:57 · answer #3 · answered by Tom K 7 · 0⤊ 0⤋