Comments on: Rules Regarding No-Interest Family Loans

By: panghalili

panghalili — Wed, 06 Jul 2011 16:58:51 +0000

Is there a difference if the gift is from a US person in the US to foreign person in a foreign country?

By: scott

scott — Mon, 04 Jan 2010 02:15:33 +0000

what is the definition of “investment earnings”? Is it only referring to the stock, mutual funds? If I have rental income, does it count as investment income?

By: Thanh Vu

Thanh Vu — Tue, 16 Jun 2009 22:52:04 +0000

I will loan my son 205K to buy a house for his primary residence. He is single and is making about 50K a year with around $800 in investment income. He is legally liable for this debt. What interest rate am I allow to charge him and what portion of the interest is taxable to me and tax deductible for him?

By: Barbara Trelease

Barbara Trelease — Mon, 09 Mar 2009 18:01:45 +0000

My mother will lend me money (>10k, <100k) to pay off my credit card balances, rather than using outside debt consolidation, etc. It is not to purchase a house or invest. What is the required interest rate, to make things less complicated with the IRS? What sort of document is required?

By: Roger Young

Roger Young — Sun, 04 Jan 2009 19:29:14 +0000

I wish to loan my son $50K at 5% simple annual interest toward purchase of a new home with payment due upon sale of previous home and “forgive” the interest payments as a gift under the $11K rule. Is there special contract wording I should follow?

By: John C. Lynch

John C. Lynch — Wed, 10 Sep 2008 14:57:21 +0000

My daughter just finished graduate school and has borrowed over $125,000 over the past 2 years. She tried to consolidate her loans but was told by several companies that she owed too much money. She has come to me and her mother for help. We have the money to help her but I told her about the $100,000 limitation and I didn’t want to have trouble with the IRS. She was in an intership program last year and didn’t earn much. The school district would not pay her while she was in the program. She had a part time job at a coffeee bar but was injured away from work and could not work. She owns her own condo and has moved a roommate in to help with her expenses. She started back to teaching this September and with her master degree her gross salary will be $60,000 per year. The school distict pays her salary on a 12 month basis. She gets her first pay check at the end of September but we don’t know how much it will be. Can you help me or comment on the situation as I would like to give her the $125,000 but I will need the interest for the money we are lending and losing that intertest on the Money Market certificate that I will taking the money from. I will loan her the money in mid October at the expiration of the Money Market certificate so I will not be penalized for cashing it in. I have come up with an interest rate of .800% per annual. I figured her payment to me based on 119 months wouldbe about $1.084.75/month. Her mother told me last night that is too much that we should keep it under $1,000 or she wouldn’t have any money to live on. Her condo payment will be about $1,200 per month plus condo fees etc all of this would amount to about $!,500.00 per month (including her mortgage payment).

By: GoldenFortune

GoldenFortune — Tue, 16 Oct 2007 17:20:55 +0000

what does it mean “And for loans of up to $100,000 the IRS will not get involved as long as the borrowerâ€™s investment earnings donâ€™t exceed $1,000 per year.” as stated in your article. Also, is there a “button” to forward your articles via e-mail to a friend? (Did I miss it?) Thanks!

By: nickel

nickel — Tue, 09 May 2006 13:10:50 +0000

You are correct that the gift limit is now $11k. But the cutoff for the IRS ignoring a loan is still $10k. If it goes over $10k, then it is potentially subject to the imputed interest rules.

By: mapgirl

mapgirl — Tue, 09 May 2006 13:04:30 +0000

Actually, the gift amount is now $11K. That’s what my mortgage banker told me two years ago when I got a gift from my folks.