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Do you pay tax on lending?

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Do you pay tax on lending?

Since personal loans are loans and not income, they aren’t considered taxable income, and therefore you don’t need to report them on your income taxes.

What are the tax implications of investing?

Normally, investment income includes interest and dividends. The income you receive from interest and unqualified dividends are generally taxed at your ordinary income tax rate. Certain dividends, on the other hand, can receive special tax treatment, which are usually taxed at lower long-term capital gains tax rates.

How can I avoid paying taxes on my investments?

In this Guide:

  1. Capital Gains Should Be Long-Term.
  2. Keep Your Portfolio in Tax Sheltered Accounts.
  3. Invest in Municipal Bonds.
  4. Consider Real Estate Investments.
  5. Fund Your 401(k) Beyond Your Employer Match.
  6. Max Your IRA Savings Every Year.
  7. Take Advantage of an HSA If You Can.
  8. Consider a 529 for Education Expenses.
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Do you have to pay taxes on peer to peer lending?

First off, yes, it’s definitely taxable. There’s no need to panic though as the taxation terms on P2P loans are actually pretty reasonable. The interest you receive through loans is taxable just like any other form of income.

Are investment profits taxed?

Investment income such as interest and rent is considered ordinary income and will generally be taxed according to your ordinary income tax rate. Qualifying dividends are also taxed at long-term capital gains rates (dividends that don’t qualify for long-term capital gains rates are taxed at ordinary income tax rates).

Do you pay taxes on investments if you don’t sell?

If you sold stocks at a profit, you will owe taxes on gains from your stocks. And if you earned dividends or interest, you will have to report those on your tax return as well. However, if you bought securities but did not actually sell anything in 2020, you will not have to pay any “stock taxes.”

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What are the risks of peer-to-peer lending?

The main peer-to-peer lending risks are:

  • Yourself (psychological risk).
  • Not enough diversification (concentration risk).
  • Losing money due to bad debts (credit risk).
  • Losing money due to a P2P lending site going bust (platform risk).
  • Losing money due to fraud or negligence.
  • Selling into a loss (crystallising losses).