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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12010
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Do I have to pay taxes on a loan?

Customer Question

Do I have to pay taxes on a loan? This is a loan from a friend to buy a house - the loan is in the amount of $60,000.
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.
No, loan proceeds are not taxable (because they are to be paid back). They are neither deductible by the lender, nor reportable as income by the borrower. However, if the loan is not repaid, then the lender can deduct as a bad debt, and the borrower must pay income on what the IRS calls the net inverse in wealth (forgiven debt – money borrowed and not repaid).