How Are Bridge Loans Taxed?

Bridge loans provide short-term funding in advance of a secondary source of financing. A bridge loan can be used by individuals and businesses as a way to commence with a project, such as building a home or plant. The proceed from the secondary funding source are used to pay the bridge loan. A bridge loan may have a term that is no more than 12 months, at a rate that is much higher than the loan interest rates for conventional loans.

The Taxation of Bridge Loans

The proceeds from a bridge loan, like other types of loans, are not taxed as income when received. The loan interest may be tax deductible depending on the adjusted gross income (AGI) of the individual borrower or the net income of the business. Loans, as a general rule are not treated as an income item since the proceeds must be repaid under the terms and conditions of loan agreement.

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