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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3173
Experience:  IRS licensed Enrolled Agent and tax instructor
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I have a fiend who owes me $25000. When he pays me how do I

Customer Question

I have a fiend who owes me $25000. When he pays me how do I claim it on my taxes??
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

Is he repaying you a loan? Generally, repayment of the loan principle is not taxable. Only the interest is considered a taxable income. You will report the interest on Schedule B.

Customer: replied 1 year ago.
I have paid him over an approximate 5 year period.
Expert:  emc011075 replied 1 year ago.

Because you didn't take a deduction on your tax return when you loaned him the money (I am assuming), you don't need to claim it on your tax return when he pays you back. It is a repayment of the principle. If he pays you back with interest, than you claim only the interest on Schedule B.

For instance, you loaned him 25K at 3% interest, so he pays you back 25,750. The 25K is not taxable and you will claim $750 as interest on your tax return.

Expert:  emc011075 replied 1 year ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.