Full question:
We are about to loan our son $5000 for a down payment on a property in Kingston, OH (Ross county) We want to use a promissory note for the loan. We don't want to charge him interest. We simply want him to pay us back in monthly payments of $100 until paid. I have read that this may present a problem with the IRS. Is there a way around this?
- Category: Debts and Credit
- Subcategory: Promissory Notes
- Date:
- State: Ohio
Answer:
It is recommended to use a promissory note when making a loan to a family member so that it's note construed as a gift by the IRS.
It is typically recommended to include an interest rate as well. The $5,000 amount involved shouldn't raise a gift tax issue, since the current federal annual exclusion is $13,000 for individual gifts or $26,000 for gifts by spouses. However, the gift tax will not apply until you give away $1,000,000 in your lifetime.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
