I own a small business. My grandparents “lend” me $15,000. I pay them as I can. When I fill my income tax return, will the loan be considered income and I will need to pay taxes on it?
Loan proceeds are not taxable income. If you pay interest on the loan, the interest amount is taxable to your grandparents. If you don't pay back the loan, it may be characterized as a gift, and your grandparents may be on the hook for gift tax on $1,000 (the amount over the $14,000 threshold).
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@taxgeek83…if you want to take it a step further….each grandparent can give manny1010 $14,000 and if they are married…their spouse could get another $14,000 from each. At the end of the day, the grandparents can gift $56,000 to both Manny and spouse. Either way, the $15,000 shouldn't be taxable. However…since I haven't passed REG yet or have my CPA, don't take my word on it…lol.
No need to do anything. If the loan is cancelled, at that point you'll have to put that on your return as other income but don't worry about that part.
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Sorry, but I find this post quite funny and interesting because only accountants would actually report this on their tax return. I think these should be off balance sheet items. Alright, NVM I was just trying to be humorous. It is finally SUNNY in Michigan so I am HYPED right now. Believe it or not it Snowed last week. :/
OR you can play dumb and not “report” it because it wasn't a revenue item. As long as your grandparents don't take the deduction, the IRS will never know. You could always say, 14,000$ was a “gift,” while the 1,000$ was a loan with a 1$/annum interest rate yearly.
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Haha I figured. thats why i deleted the comment. It varies depend on when you submit i think. I submitted mine during the beginning of January and got it in like 3 weeks. Feel like if you do it closer to April-May period it will take longer since more candidates graduate more people are scheduling.
Ha – good points! To get back to OP's original questions though – Are the loan proceeds taxable income? – the answer is no.
By the way, I woke up to a snow-covered car this morning. This time last week, I was sitting on a deck, sunning myself and enjoying an adult beverage. By Tuesday/Wednesday, we're supposed to be back in the mid-high 70s. Yay spring! 🙂
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