Private Money Lending Basics

2 Replies

I've done one private money loan. Looking to do more but I'm new to the game. When lending out of state, do we owe taxes to the state the borrower lives in?

Are people doing this under a business in order to utilize tax write offs, or personal (no tax benefit)?

If under a business, what are the logistics (structure etc.)? Pros and cons? Does government regulation become an issue?

@TJ Boutaugh

It depends on your level of activity.

If this is not in your trade or business, the interest income will be considered portfolio in nature
if it is a trade or business, you may have to source the income based on the rules of states(Cost of performance vs market based sourcing).