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ldkw
New Member

Is paying off a loan considered income, and if so, what % is taxed?

We were given a $10,000.00 CD and decided to pay off a loan with it and when we did our taxes they said it was considered income and taxed us $2500.00

12 Replies
Lisa995
Level 12

Is paying off a loan considered income, and if so, what % is taxed?

What type of reporting form did you received for cashing in the CD?  Is it shown on a 1099B?
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪
VolvoGirl
Level 15

Is paying off a loan considered income, and if so, what % is taxed?

The interest on the CD would be taxable income.  Who gave you the CD?  Did you inherit it?  Did you get a 1099R for it?
ldkw
New Member

Is paying off a loan considered income, and if so, what % is taxed?

My Mother-in-law gave it to us, I'm most concerned with them taxiing 25%+ on it, Trying to pay off debts doesn't really feel like income to me!
VolvoGirl
Level 15

Is paying off a loan considered income, and if so, what % is taxed?

Why are you entering it into your tax return?  And how/where?  Did you get some kind of 1099 form for it?  Did the bank give you a form?
ldkw
New Member

Is paying off a loan considered income, and if so, what % is taxed?

Our tax preparer said we have to claim it as income. Don't know where we go from here/
VolvoGirl
Level 15

Is paying off a loan considered income, and if so, what % is taxed?

As the answer below says you do not report gifts on your tax return and gifts are not taxable.  From what you've said it is not taxable.  There must be more details.  Ask your tax preparer why it's taxable.  Did your mil take it out of a IRA or some kind of retirement account?  Did she sell something?  Was this a regular Desktop CD/Download program like at a bank or Credit Union?
VolvoGirl
Level 15

Is paying off a loan considered income, and if so, what % is taxed?

Oh, tell us about the loan you paid off.  Maybe that has to do with it.
Lisa995
Level 12

Is paying off a loan considered income, and if so, what % is taxed?

If you have a tax preparer, maybe you should get them to explain it to you better.  The limited information youre giving here, doesn't sound like a taxable event.
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪
ldkw
New Member

Is paying off a loan considered income, and if so, what % is taxed?

He explained that paying off a debt was considered income and needed to be taxed.
Lisa995
Level 12

Is paying off a loan considered income, and if so, what % is taxed?

that doesn't sound correct.   again, what type of document did you received from the bank that held the CD that was cashed? (just to verify, you're referring to a CD - Certificate of Deposit?)
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪
suzyquzy
Level 2

Is paying off a loan considered income, and if so, what % is taxed?

You or he are missing something or not providing us with something
suzyquzy
Level 2

Is paying off a loan considered income, and if so, what % is taxed?

A gift is not taxable income, nor is paying off a loan.

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