# How would the following income be taxed?

Excuse the lack of terminology here.

A general contractor who is also a friend is seeking money to purchase, redo and then sell an existing home. He has about 85% of the total amount to purchase the home in cash, and so being a friend he asked me to help out.

He has written up a contract where for every dollar I provide to him now he will in 10 months time return my initial amount plus 18%.

I am unclear on how this income would be reported? Would this be considered capital gains? If I request he returns it to me in > 12 months time would then it be considered long term gains?

I have known him for a long time, he is very good at what he does and I am not interested in judgment calls on IF I should do this. I will determine that. I just need to know if it is actually worth the investment after taxes.

• oops sorry, United States – treeNinja Sep 29 '14 at 21:17

If you loan $10,000 and receive$1,800 in interest, and your tax bracket is 25%, then you will owe \$450 in tax.