What are the tax liabilities for personal loans and gifting of money?
Posted on November 21, 2008
Filed Under Personal Finance |
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If someone were to grant a large personal loan to someone else (100K or larger) what are the tax liabilities or responsibilities of the lender and the borrower - if any?
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There are no tax liabilities on loans, but rather what you buy with the loan.
You don’t mention what country you are in. Under US tax law. The borrower has NO tax related to a loan. The lender would include the interest portion of payments in their total income for tax purposes, and pay the same rate as normal income. In the case of a gift, the receiver has no tax. The giver can give up to $12,000 per year to each recipient with not tax results. Above that amount, a gift tax return must be filed, but up to $1 million can be given in a lifetime before taxes are actually paid.