Taxes on intest made?

Question

If I loan someone 10K at 10 or 20%. Interest. Am I taxed on the interest made? Do they give me a 1099 or how does that work? Thanks

Carl Fischer · Answer

@Jeremiah Gaviña

That is why I use my Roth Ira to lend money so I do not have to pay taxes. Thus increasing my return by 35%.

Paul Allen · Answer

Yes, interest income is taxable to you. They should issue you a 1099-int if the interest paid exceeded $10, but you are still responsible for paying the tax even if they do not issue the 1099-int.

Account Closed · Answer

@Jeremiah Gaviña Good question. Taxable to you and the interest is reported on Schedule B of your tax return.

Jeremiah Gaviña · Answer

Account Closed so as long as you leave it in the IRA there’s no tax, but if you take it out then they tax you? Thanks

Basit Siddiqi · Answer

@Jeremiah GaviñaUpon the loan agreement - you may be asked to provide information such as your name and social security number.You will be required to report the interest income on your tax return if you do or don't get a 1099-INT.Your profile says you are from Texas. If this is the case - you may not be required to pay state taxes on the interest earned.

You should compare the interest you earn on the deal with a muni bond that you can invest in. If the risk is higher with the person you are loaning money to - the interest earned should be higher than the interest on a muni bond if it is considered a safer investment.

Dmitriy Fomichenko · Answer

@Jeremiah Gaviña,

If you make investment in your IRA - the interest income will be sheltered from taxes. IRA is considered tax-deferred vehicle, allowing you to grow your account without being taxed until distribution. When you take the distribution from an IRA at retirement - you will be taxed on the amount of distribution in the year of distribution.

If you have a sizable amount in your IRA it is possible to access those funds prior to retirement using little known loophole.

Basically all retirement accounts work this way, the only difference with self-directed IRA or 401k is that you have alternative investment options beyond stock market.

Also, if you use Roth then distributions will be tax free.

Jeremiah Gaviña · Answer

@George Blower thank you

George Blower · Answer

@Jeremiah Gaviña

I would stay away from anything that references the word "loophole."

Carl Fischer · Answer

@Jeremiah Gaviña

Nope no taxes for me and I take the $$$ out.  Roth IRA and qualified distribution for me and my kids, & grandkids.

Jeremiah Gaviña · Answer

@Paul Allen. Thank You

Taxes on intest made?

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