Private lending agreement and tax implications

[Ryan Proffit]

Hello team,

My partner and I are currently trying to purchase a value add 8 plex. Our banker will let us do 80/20. We are currently at 15%. I recently found a family member willing to loan us the other 5%. I was thinking of paying her simple interest of 8% yearly. She would be loaning us around 20k. She currently is on social security and takes 1300 per month from her retirement portfolio. My question is, how will this affect her taxes? I want to make sure this is a good deal for her. Thanks for any help or advice you can give. Let me know if more info is needed.

Ryan.

[David de Luna]

If you 1099 her the interest expense and she reports it on her 1040 then it's treated as ordinary income.