Fiancé loaned me an interest-free loan for my side business, and we are getting married this year. How is this loan treated on TurboTax?

a loan has no tax consequences so it's not reported on the 1040(s) you file.  you don't say what year the loan was made because if it was in 2021, rules regarding the requirement to pay or impute interest may come into play. iRC sec 7872 comes into play for loans with a below-market interest rate.  in 2022, there is no tax issue if you marry because spouses can make unlimited gifts to one another. if your wife forgives the loan in 2022 or later there is no forgiveness of loan income issue 

What kind of side business?

• Schedule C sole proprietorship or single member LLC
• S- or C-corp
• Partnership with someone else
• Something else

 

Will your wife be involved in the business?

• Silent partner (investor)
• Active partner (participates materially in the business activities)
• Employee
• Subcontractor

 

If the loan was made in 2021, your fiancée must report as taxable income, the interest they charged you or could have charged you, even if they did not actually charge interest.  This is called imputed interest.  When you loan money you are supposed to charge interest and the IRS requires you to report the interest as income even if you don't charge interest, using at least the minimum federal rate (AFR, applicable federal rate).  This is variable and changes every month. 

https://www.irs.gov/applicable-federal-rates

 

For example, if she made the loan in September, 2021, with interest compounding annually, the AFR was 0.17%.  For a $10,000 loan, that's $1.41 per month of interest.  The AFR has really risen with inflation.  If the loan was made now, the AFR is about 2.2%.   And of course, if they charged more than the AFR, they report as income the interest they actually received.  

 

She should report interest on her 2021 tax return.  If you get married before the end of 2022, she can forgive the loan and then you don't report any more interest, but you also don't report loan payments as a business expense.  The forgiven loan becomes part of the business capital.

 

Exactly how the forgiven loan is treated depends on the kind of business, per my questions above.  99% of the the time the answer will be very simple, but I wanted to make sure we don't have to cover one of the 1% edge cases. 

 

Also, if she wants to keep her finances separate and have you repay the loan, we can also talk about that.  It's another unusual situation. 

Thanks for answering, I also want to know information online related to TurboTax.