Question about friend/family loan repayment

[xiujunliu]

Hello, i have a tax question and wonder if someone could help me out!

i loaned a friend of mine in 2020 in amount of $30K and she is repaying me monthly in amount of $2200 in 2021. i did not report these monthly payments to my tax return because i thought these are not income. i did not ask her to pay interests and these monthly payments are paid toward to the loan principles. 

My question is should i report these monthly deposit as income? is my understanding correct?

thank you!

[VolvoGirl]

Your first post is here and you said you are getting 5% interest.

https://ttlc.intuit.com/community/retirement/discussion/i-lend-a-friend-30k-loan-and-she-repays-me-2... 

[xiujunliu]

sorry about the confusion. i am trying to see if i need to do amendment of my 2021 tax return. The friend is very close of mine and interest is not that important as long as she pays me back. Currently she is paying monthly to my bank account. I am counting them toward to my principle only. ( so monthly about $2200 in 2021). She could pay the interests in the lump sum amount in 2022. 

so for year of 2021...do i need to report that monthly payment? my guess is not...because they are toward to the principle, not including interests. 

thanks again!

[Mike9241]

unless you're charging interest you're running afoul of IRC section 7872 since the loan is more than $10,000.

it would require you to impute interest income, taxable to you, and then since you aren't collecting it treat it as a gift to the borrower.

and if you're charging interest the IRS would say part of each payment made to you is interest and part principal

doesn't matter that you'll be collecting the interest as the final payment.