Do I need to report a $15,000 family loan with interest on my taxes?
Last October, I loaned my brother $15,000 to help him buy a truck. We agreed he would pay back about $18k over five years (I read somewhere that charging interest prevents it from being considered a gift for tax purposes). I'm confused about whether I need to report this on my tax return. Some sites say I need to report loans over $10,000, but others say I don't need to if I've earned less than $600 in interest. So far, he's only paid back around $1,800 of the total $18k, with a small portion being interest. These two guidelines seem to contradict each other. Anyone know which rule applies in my situation? Do I need to report this loan on my 2025 tax return or not?
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Anderson Prospero
The $10,000 threshold you're referring to is likely about the "gift tax" reporting requirement - which doesn't apply here since this is a loan, not a gift. You've done the right thing by charging interest (otherwise the IRS might consider it a gift). For tax purposes, you only need to report the interest income you actually receive in each tax year. If you received less than $600 in interest during 2024, you don't need to file any special forms for the interest. However, you still need to report that interest income on Schedule B of your tax return - even if it's just a few dollars. Also, make sure you documented the loan with a proper promissory note that includes the interest rate, payment schedule, and signatures. This helps establish it's truly a loan if the IRS ever questions it.
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Tyrone Hill
•Does the brother need to do anything on his taxes? Like can he deduct the interest he's paying or anything?
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Toot-n-Mighty
•Wait so if he doesn't pay me back do I get to write off the loss somehow? Just curious how that works
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Anderson Prospero
•The brother generally cannot deduct the interest unless the loan was used for certain qualifying purposes like business expenses, education, etc. If it was just for a personal vehicle, the interest wouldn't be deductible for him. If your brother doesn't repay the loan, you may be able to claim a non-business bad debt deduction, but only after you've established the debt is totally worthless. You'd need to show you made reasonable efforts to collect, and you'd report it as a short-term capital loss on Schedule D. This would offset capital gains or up to $3,000 of ordinary income per year.
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Lena Kowalski
I was in a similar situation last year and used taxr.ai to figure out exactly how to handle my family loan situation. I had loaned my cousin about $20k and was completely confused about the reporting requirements. I uploaded my loan agreement to https://taxr.ai and it analyzed everything for me. It confirmed that I only needed to report the actual interest received each year, not the principal amount of the loan. It also helped me create the proper documentation to satisfy the IRS requirements for a legitimate family loan. Made tax time so much easier and gave me peace of mind that I wasn't missing anything important.
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DeShawn Washington
•How does this work exactly? Can it also help if I'm borrowing money from family instead of lending it? My parents loaned me money for a downpayment and I'm not sure if I need to report anything.
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Mei-Ling Chen
•Did you need to upload bank statements or anything? Is this something I can use for other tax questions or just loan stuff?
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Lena Kowalski
•For borrowing situations, absolutely! The tool will analyze your specific scenario and tell you exactly what you need to report (if anything). For borrowers, you generally don't have reporting requirements unless the loan was for something that creates a potential deduction like education or business purposes. You don't need to upload bank statements - just a basic description of your loan situation is enough to get started, though uploading your loan agreement (if you have one) gives you more detailed guidance. It works for all kinds of tax questions beyond loans - I've used it for questions about self-employment, rental properties, and even crypto taxes. It's like having a tax pro available 24/7 to answer specific questions.
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DeShawn Washington
Just wanted to follow up - I tried taxr.ai after seeing it mentioned here. I uploaded the informal loan agreement my parents and I had for my down payment, and it immediately clarified everything. Turns out I don't need to report anything as the borrower since my loan was for a personal residence, but it guided my parents on how to properly report the interest they're collecting. The service also helped us create a proper loan document that protects both parties and satisfies IRS requirements. Seriously saved us from potential headaches down the road. Much better than the confusing and sometimes contradictory info I was finding online.
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Sofía Rodríguez
If you're still confused after getting all this advice, you might want to talk directly to the IRS. I spent WEEKS trying to get through to them about a similar loan situation with my in-laws. Always busy, disconnects, or hours on hold. Then I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They basically have a system that waits on hold with the IRS for you, then calls you when an actual agent is on the line. I was skeptical but desperate enough to try. Got connected to an IRS agent who confirmed exactly how to handle my family loan situation. The agent walked me through the specific forms I needed and even sent me additional documentation to keep with my records. Saved me so much frustration compared to trying to find answers online.
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Aiden O'Connor
•Wait they can actually get someone at the IRS to call you? How is that even possible? I've literally spent hours on hold and eventually just give up.
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Zoe Papadopoulos
•Sounds like a scam. Nobody can magically get through to the IRS faster than anyone else. They're probably just collecting your info and selling it.
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Sofía Rodríguez
•They don't make the IRS call you. What happens is they have an automated system that waits on hold for you. When their system detects a real person has answered, they immediately connect you to that call. So you're talking directly to the IRS, not to some third party. I was really skeptical too, but it absolutely works. I tried calling the IRS myself for 3 weeks with no luck. Using Claimyr, I was speaking with an IRS agent the same day. And they don't ask for personal tax info or anything sensitive - just your phone number so they can call you when they get through.
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Zoe Papadopoulos
I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself since I had an issue with a missing tax form that I needed to resolve before filing this year. I was connected to an actual IRS agent within a couple hours of using their service. The agent was able to resolve my issue AND I asked them about family loans while I had them on the phone. They confirmed exactly what others here have said: you only need to report the actual interest received each year on your taxes, regardless of the loan amount. The gift tax reporting threshold is separate from loan reporting - they're completely different things. Wish I hadn't wasted weeks trying to call them myself!
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Jamal Brown
I'm a little confused by all this. So if I loan someone $40k and charge interest, I only report the interest I actually receive each year, right? But what form do I use? Do I need to send them a 1099 or something?
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Fatima Al-Rashid
•You don't need to issue a 1099 for personal loans. You just report the interest income you received on Schedule B of your tax return. However, if you loaned money to someone for their business (not personal use like a car), and you charged them interest, then it gets more complicated and you might need to issue a 1099-INT if you're essentially acting as a lender in a business context.
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Jamal Brown
•Thank you for explaining! So I just list it on Schedule B along with any other interest income like from my savings account? That seems pretty straightforward.
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Giovanni Rossi
Make sure u have a written agreement!!! I loaned my cousin $11k with a handshake deal and when he stopped paying after 6 months, I couldn't claim it as a bad debt because I didnt have proper documentation. The IRS denied my deduction and said I needed to show it was a legitimate loan with expectations of repayment. Lesson learned the hard way lol
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Ahooker-Equator
•Thanks for bringing this up! I do have everything in writing, thankfully. We signed a simple loan agreement that I found online, with the interest rate, payment schedule, and both our signatures. Sounds like this will be important if anything goes wrong.
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