[Disclaimer: I am not an accountant nor am I qualified to provide tax advice. This post shares how Lending Club and Prosper are presenting their tax information this year. You should seek professional advice before taking action on any of the ideas presented here.]
Every year we share what investors can expect when filing their taxes if they invested in Lending Club or Prosper loans. Below I share some helpful tax resources from each company, my account performance from 2016 and the tax inefficiency investing through a taxable account.
Filing Taxes on Lending Club Loans
Similar to last year, Lending Club has made the process easy if you use TurboTax to file your taxes. They have dedicated part of the help section of their website to outline the step by step process of how to accomplish the import. If you’re not a TurboTax customer, Lending Club has provided a 2016 update to their Tax Guide for Retail Investors. Your tax documents for 2016 can be found under the “Statements” section of your account under tax statements. The consolidated PDF you receive will include various sections as outlined below depending on your account. Most investors will receive just a 1099-OID and 1099-B unless you sold notes on the secondary market. For investors who started investing in late 2016 it is possible you won’t have any losses which means you won’t receive a 1099-B for recoveries and proceeds from charged-off loans.
In my case I received a 1099-OID and 1099-B. My 1099-OID shown below shows the interest I received from Lending Club notes.
My 1099-B shows proceeds of $151.17. This is the total amount of proceeds I received from charged off loans. The “Cost or Other Basis” is the cost basis for the loans that have charged off. If you take any proceeds and subtract it from the basis you calculate the losses which is broken down by loan in the tax statement and also totaled at the bottom. In my case I had $366.62 short term losses and $980.52 long term losses totaling $1,347.14 in total losses for the year. [Read more…]