and another question after the accident my car is total loss and the insurance company pay 11000 for my car do I need to pay tax for that. thanks for your time
2007-07-30 11:20:02 · 6 answers · asked by Phong K 1 in Business & Finance ➔ Taxes ➔ United States
No and no. The 20k you borrowed is a debt, you may have to pay it back but no tax is due. The 11K is payment for your wrecked car. They only paid you market value for the car (or repair costs) so you didn't make a profit so no tax on that either.
2007-07-30 11:25:05 · answer #1 · answered by Slumlord 7 · 1⤊ 0⤋
You borrowed the money five years ago. Unless the lender has forgiven your debt, you do not owe tax. If the lender forgave some of your debt, you owe tax on that.
When you have insurance reimbursement for a totalled car, you do not owe any tax unless the insurance company pays you more than the car was worth before the loss. This assumes you did not use the car for business purposes.
If you used the car for business purposes, then you may have a gain, because you have taken deductions on the car. The amount of gain depends on how you depreciated the car. You would have to have a tax preparer look at your records to determine if there was a taxable gain.
2007-07-30 18:26:25 · answer #2 · answered by ninasgramma 7 · 1⤊ 1⤋
No, you do not pay tax on borrowed money as long as you repay it. If you fail to pay it back and the debt is forgiven, THEN it becomes taxable income.
Insurance settlements that only make you whole again are not taxed. If you got more from the claim than your actual loss, the excess would be taxable. That rarely happens, of course.
2007-07-30 19:22:47 · answer #3 · answered by Bostonian In MO 7 · 0⤊ 0⤋
No in either case. You don't pay taxes on money you borrow - but if you default, some of the amount you don't pay can end up taxable. The insurance payout on your car was to compensate you for the car, and is not taxable.
2007-07-30 18:33:37 · answer #4 · answered by Judy 7 · 1⤊ 0⤋
no, you dont pay taxes on borroed money. you pay interest on borrowed money.
2007-07-30 18:23:10 · answer #5 · answered by Steve 4 · 0⤊ 0⤋
no to both questions
2007-07-30 18:24:22 · answer #6 · answered by mister ed 7 · 0⤊ 0⤋