Posted on: 22nd Jun, 2010 02:23 am
I took out a loan for $4600 in april. Is this taxable? how much should I start putting aside for taxes?
Hi Gingerale,
Loan funds are not considered to be your income because you have the obligation to pay it off in full. Be it a personal, business or a home loan, you have the responsibility to repay it within a certain period of time. Moreover, if you take a home loan, you can deduct the interest you pay on it from your taxes. But this does not happen in case of a personal loan.
Though the loan funds are not taxable, you'll have to pay taxes if the entire or a portion of the debt is forgiven. If the debt is canceled, you do not have to pay it off. This canceled amount will be considered as your taxable income.
Loan funds are not considered to be your income because you have the obligation to pay it off in full. Be it a personal, business or a home loan, you have the responsibility to repay it within a certain period of time. Moreover, if you take a home loan, you can deduct the interest you pay on it from your taxes. But this does not happen in case of a personal loan.
Though the loan funds are not taxable, you'll have to pay taxes if the entire or a portion of the debt is forgiven. If the debt is canceled, you do not have to pay it off. This canceled amount will be considered as your taxable income.
I think the loan and funds proceeds are not taxable. It is the responsibility for you to repay in agreed time in full with interest. So I think the amount of the $4600 is not taxable.