topic How do I declare interest on a promissory note? in Get your taxes done using TurboTax

How do I declare interest on a promissory note?

woodbess1 — Sat, 01 Jun 2019 18:04:30 GMT

Are you paying the interest or are you receiving the inte...

HelenaC — Sat, 01 Jun 2019 18:04:31 GMT

Are you paying the interest or are you receiving the interest?

If you are receiving the promissory interest, enter it as...

HelenaC — Sat, 01 Jun 2019 18:04:32 GMT

If you are receiving the promissory interest, enter it as if you received form 1099-INT. In the Received from box, you may enter Promissory Note Interest Income and the name/SSN, if you have it.

See Where do I enter Form 1099-INT?

If you are paying the promissory interest and this is a personal loan, you can't deduct the interest. According to the IRS, only a few categories of interest payments are tax-deductible:

Interest on home loans (including mortgages and home equity loans)
Interest on outstanding student loans
Interest on money borrowed to purchase investment property
Interest as a business expense

All other interest is considered personal interest, which includes interest charged on credit cards, auto loans, unpaid utility bills and late payment or underpayment of federal, state and local income taxes.

Re: Are you paying the interest or are you receiving the inte...

armondand — Sun, 12 Jul 2020 21:59:23 GMT

receibing

Re: Are you paying the interest or are you receiving the inte...

armondand — Sun, 12 Jul 2020 22:00:43 GMT

receiving

Re: Are you paying the interest or are you receiving the inte...

DawnC — Sun, 12 Jul 2020 22:09:46 GMT

See Where do I enter Form 1099-INT? @armondand

Re: If you are receiving the promissory interest, enter it as...

lychee — Tue, 22 Feb 2022 00:56:49 GMT

If paying, would I have to report it to the IRS, eg prepare and file a 1099-INT with IRS and a copy to the creditor?

Re: If you are receiving the promissory interest, enter it as...

JamesG1 — Tue, 22 Feb 2022 01:32:42 GMT

IRS Instructions page 1 for forms 1099-INT states the filing requirements:

File Form 1099-INT, Interest Income, for each person:

To whom you paid amounts reportable in boxes 1, 3, or 8 of at least $10 (or at least $600 of interest paid in the course of your trade or business described in the instructions for Box 1. Interest Income, later);
For whom you withheld and paid any foreign tax on interest; or
From whom you withheld (and did not refund) any federal income tax under the backup withholding rules regardless of the amount of the payment.

@lychee

Re: If you are receiving the promissory interest, enter it as...

lychee — Tue, 08 Mar 2022 02:02:28 GMT

Box 1 interest might be the only one that applies (personal loan, individual to individual) because it's over $600. However, the rest of the instructions seems to indicate 1099 need only be filed if the payor is an institution or in the business of lending. This is a one time intra-family loan so neither seem to apply.

Re: If you are receiving the promissory interest, enter it as...

KrisD15 — Tue, 08 Mar 2022 02:49:47 GMT

Correct

No 1099-INT needs to be filed by either of you.

IF RECEIVING THE INTEREST, simply claim the amount of interest received in 2021.

Enter that under

Income

Interest and Dividends

Interest on 1099-INT (even when you don't have one)

Enter the name of the individual and the interest received.

IF PAYING THE INTEREST

Since this was a personal loan and not considered Mortgage Interest, there is no need for the Payer to report. This would be similar to Credit Card Interest.

Even if the loan was used to make house payments, unless the loan is secured by the property, it would not qualify.

The IRS wants to know who got it, not who paid it.

Re: If you are receiving the promissory interest, enter it as...

DanP0428 — Tue, 08 Mar 2022 03:26:38 GMT

TurboTax will not let you file a 1099-INT without an EIN. Interest received would have to go under miscellaneous income to use TurboTax. That did work a few years back. @KrisD15

Re: If you are receiving the promissory interest, enter it as...

KrisD15 — Tue, 08 Mar 2022 04:01:26 GMT

I entered interest received without a 1099-INT using both Desktop and Online.

This is not a 1098 for Mortgage Interest paid. For that you need an EIN or Social security number.

I entered as I stated above.

"It is reported as interest the 1040 line 2b. Could you be thinking of something else? "IF RECEIVING THE INTEREST, simply claim the amount of interest received in 2021. Enter that under Income Interest and Dividends Interest on 1099-INT (even when you don't have one) Enter the name of the individual and the interest received. "

@DanP0428

Re: If you are receiving the promissory interest, enter it as...

DanP0428 — Tue, 08 Mar 2022 11:58:02 GMT

No, I am saying that if you have online TurboTax you cannot enter a 1099-INT without an EIN. It will give error.
@KrisD15

If you try to enter it as a 1099-INT and you don't have a 1099-INT then TurboTax will ask for the EIN number and you cannot out of Needs Review until you put in an EIN. The directions that say to just enter it as a 1099-INT even if you don't have a 1099-INT do not work.

What are the directions to get the result you posted. What screens do you go to in TurboTax to det the data on the forms?

Read all of the thread to see what the question was.

Re: If you are receiving the promissory interest, enter it as...

DianeW777 — Tue, 08 Mar 2022 13:20:45 GMT

It's not clear whether you imported the interest, but if so and this is the error you received you can delete it and enter it yourself by using the following steps. This will allow you to enter the interest income manually. Interest income is taxable starting from $1 with or without Form 1099-INT.

Go to Wages & Income (or Personal Income for TurboTax CD/Download version)
Select Interest and Dividends > Interest on 1099-INT > Revisit/Start > I'll type it myself
Enter bank name and interest amount
See the images below

Re: Are you paying the interest or are you receiving the inte...

frankivo — Sat, 02 Mar 2024 14:38:39 GMT

I am receiving the interest.

Re: Are you paying the interest or are you receiving the inte...

DianeW777 — Sat, 02 Mar 2024 14:50:59 GMT

Interest income, regardless of the source is taxable income.

If you are receiving interest income from an individual you report it like any other interest income.

Where do I report interest income? (whether or not you received a 1099-INT)

@frankivo