Tax on return of money to friend

What is the name of your state?
Illinois

Hi,
I borrowed about $10,000 from a friend last year to tide me over some trouble. I live in the UK and he lives in the US and now I want to pay him back the money in lots of $1500 each month for the next 6-7 months. I'm not sure though if I can just transfer the money to his account. What I'm asking really is, will it be regarded as income for him and so will he be taxed on it? Or is it okay that I just tranfer the money to his bank. In the UK it would be no problem as bank don't get involved in tax laws, but I believe banks are involved to some extent in the U.S. Before we did anything we just wanted to make sure. Both of us have personal accounts and the only thing that goes into them generally is our salary

Thanks

Repayment of a loan is not income. Payment of interest on a loan is income. You're probably fine. I assume he has a written loan agreement showing that he lent you $10,000 and listing the interest rate, if any. If not, draw one up immediately.

Hi,
Thanks for replying so promptly. No we don't have a loan agreement. He's my best friend from childhood, and just loaned me the money cause I was in trouble and needed it at that time. He's not charging me an interest rate on the money, and it's a trust agreement that I'll pay it back. Do we still need to draw up an agreement for tax purposes?

No

Yes. That way he can point to a legal, notarized contract that says you aren't paying him interest. The IRS will impute interest (tax him on it whether it's paid or not) in some cases.