Loans From Family Members

Forum|Forum|3 years ago
February 13, 2023
3 replies
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My mother leant me and my wife $38,200 in November to help us pay off our high interest credit cards then pay her back monthly. We haven’t started the regular payments yet and I wonder what tax rules, if any apply to our situation for me and my wife and my mother. I don’t want to end up with a surprise audit. Do either of us need to claim the loan money given or received on our taxes? I don’t know how that works.

Bsch4477

Employee

The answer to your question depends on how the loan was structured including what if any interest is paid and at what rate. This article might help.

https://www.lbmc.com/blog/tax-effects-of-interest-free-family-loans/

MonikaK1

Loan proceeds aren't taxable when you receive them. If you borrow money from a bank or other institution and don't pay it back, you could receive a Form 1099-C for Cancellation of Debt income.

When you pay back a loan with interest, the receiver reports the interest income.

Payment of interest is only deductible if it's for a loan secured by your personal residence, or for business purposes.

See this article for more information on the deductibility of interest.

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Opus 17

Employee

Duplicate.

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/family-loans/01/2880730#M96241