[lrosof]

I have read many articles about people unhappy with the tax treatment of lending club..  I am confused.  So if you put your money at Marcus you get 2.25 % and you receive a 1099-int and it is taxed as ordinary income. Lending club seems exactly the same except you get a return of roughly double plus you get capital losses. These losses can be used to offset capital gains in stocks.  Capital losses above $3,000 have value since they can be written off against stocks.  So my take is the tax treatment is the same as a savings account or CD, but the capital losses are a bonus and improves taxes through the 3k deduction and offset against stock capital gains.   Am I not looking at this the right way?  What am I missing?  I have not used LC platform yet but was considering doing so.

[Fred93]

from: lrosof on May 30, 2019, 06:59:06 AM

[storm]

I think you have a good grip on how LC is taxed.  Some things to think about:

• If you have a lot invested, the interest income can bump you into a higher tax bracket.
• If you have a lot invested and since LC does not withhold taxes, you can be in for a nasty surprise come tax season unless you adjust your W-4.
• If you invested in stocks/mutual funds/real estate instead and held on to it for over a year, you have the advantage of them being taxed at the more favorable long-term capital gains rate.
• I think the unhappiness really stems from a combination of having a large amount of write-offs (bad loans), little to no capital gains to offset, and having to roll over the losses into another year because of the $3k cap.