Do taxes have to be paid on the principal of a loan?

View your credit file based on any of the UK credit reference agencies, or all three at once
LifeLock is the only Identity Theft Prevention Solution backed by a one-million dollar guarantee!Click here to get a 10% discount.

LifeLock Identity Theft Prevention - Save 10%

I am a small business owner and bought my property through owner financing with a down payment and 10% interest rate. I want to pay off the principal of the loan off and the financier who owned the property says that he will not accept it because the full payment would put him in a higher tax bracket. I told him that he only pays taxes on the interest earned on the loan. Can someone please tell me where exactly the taxes are paid in this situation and in case I want to sell this property through owner financing?

Thank You

Do taxes have to be paid on the principal of a loan?

You are correct. Taxes are only paid on "income," and since the money loaned to you had already been earned by him, he would be responsible for the taxes on it regardless. The interest he earns off the loan is considered income, and he would have to pay income tax on that.

Do taxes have to be paid on the principal of a loan?

Topic