Are forgivable loans taxable?
In most cases, yes. The forgiven portion of a loan is considered income and is therefore taxable. However, there are some exceptions to this rule depending on the purpose of the initial loan. For example: forgiven public service loans, forgiven teacher loans, and forgiven law school loan repayment assistance programs.
Can I receive a forgivable loan from an employer?
Yes. In fact, employer-issued forgivable loans are a popular way to attract top talent and are often used in lieu of signing or retention bonuses. They allow the employer to provide a tax-deferred payment that is contingent on certain requirements (such as the employee's continued service with the company).
Forgivable loan vs. signing bonus: Are they the same?
No. In order to be considered a forgivable loan, an official loan document must be signed. If there is no loan document, the payment would be considered a signing bonus, which is considered taxable income.
What is the interest rate if a loan is not forgiven?
Like standard loans, interest rates on forgivable loans can vary. The loan document will outline all loan details, including interest rates in the event that the conditions to forgive the loan are not met.
Are EIDL loans forgivable?
No. EIDL loans must be repaid. However, the $10,000 advance is forgivable.
Are there forgivable loans for self-employed?
Yes. Both the EIDL and PPP programs have options for self-employed workers.