How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lane Your Own Question

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3840
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
Type Your Tax Question Here...
Lane is online now
A new question is answered every 9 seconds

Can my parents loan me money (approximately up to $75,000),

Resolved Question:

Can my parents loan me money (approximately up to $75,000), via a direct transfer from bank account to bank account, for the down payment of my home mortgage without tax implications? If so, what do we need to do, if anything, in addition to the transfer? If not, what are our alternatives?
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Lane :

Sure the method of transfer, itself, is not an issue ... this can be treated as a loan (in which case they should report the interest on their tax return AND the best practice would be to draft a loan agreement) ... OR it can be treated as a gift (in which case they would file a gift tax return - JUST to report and track - there is a lifetime gift exclusion from gift and estate tax of $5,250,000)

Lane :

BUT if you intend to pay this back, the best method is to draft a basic loan agreement, pay a real interest rate that would be a normal market rate (and MOST IMPORTANT, your parents should report any interest received on their tax return (HOWEVER, you could also capitalize the interest where it is paid back at the end of a term)

Lane :

The initial transfer? Loaned money to be paid back... not taxable to you and only the interest (their earnings) on the loan would be taxable to them, WHEN RECEIVED)

Lane :

Make sense? ... Questions?

Customer:

And if we go the gift route, what would be the result of them filing this year?

Lane :

Nothing at all, in terms of income tax ... gifts ( and estate transfers, the FINAL gift, if you will) are taxed under a different system ... the gift and estate tax system .. gifts and estate transfers are TRANSFER taxes .. and are paid by the giver (or the estate itself, in the case of death)

Lane :

Everyone has a lifetime exclusion from hits... for those passing in 2013 it's $5,250,000 and is slated to go up every year

Lane :

sorry for the typo "from THIS..."

Customer:

Yea, I meant in respect to my parents. What kind of taxes should they expect just for transferring that amount this year?

Lane :

The way this works is, that if they give over 14000 to any one person in a year thay file an informational return

Lane :

Again NO tax until they've given $5,250,000 during their lifetime

Lane :

BUT

Lane :

The gift tax form, IRS form 709, is filed fore the purpose of tracking those gifts

Customer:

Ok, thanks for clarifying!

Lane :

NO problem

Lane :

one last thing?

Customer:

I believe that you've covered all of my questions.

Customer:

Thanks so much! I have literally been losing sleep over this.

Lane :

If they do LOAN the money and don't charge any interest at all IRS may call this a below market rate loan and chargs then income tax on what's called imputed interest

Lane :

NO problem Good luck with everything!

Customer:

Ok, good to know.

Lane :

THat covers everything

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer:

Sure thing!

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3840
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 4 other Tax Specialists are ready to help you
Expert:  Lane replied 10 months ago.

Thanks for the rating Nathaniel.


If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.

Thanks again,
Lane

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.