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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 9710
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My mom wants to pay off my large debt. Is there a tax

Customer Question

My mom wants to pay off my large debt. Is there a tax friendly way to do this? We live in Oklahoma. Thank you
Submitted: 1 month ago.
Category: Tax
Expert:  Lane replied 1 month ago.

Hi. My name's Lane. I can help here.


IRS would categorize this as a gift (money given wiithout the expectation of anything in exchange)


Gifts are excluded from income tax ( IRC §102). So the receiver of the gift (the person whose debt is being paid for them) sees no tax.


There IS a gift tax ( a transfer tax aid by the giver) if the amoiunt is more than 14000 - But there is a lifetime exemption on gifts - and estates, the final gift, of $5,450,000.


So the ONLY tax implication here (unless your mom has given away more than 5 million+ in her lifetime) is that there is a gift tax form filed (not to PAY a tax, but simply to track against that lidetime exempt on gifts over 14,000)

Expert:  Lane replied 1 month ago.

So, to recap, no income tax at all to the receiver (called the donee in both income and estate tax law) ... and only an estate/gift tax to the giver if amouints given during the giver's (called the donor in gift tax law) life exceed $5,450,000.


Please let me know if you have any questions at all, before rating me


If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... Otherwise JA doesn't credit me for the work here.


Thank you!


I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

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