Loans to Relatives

This may be off the general topics but I want to loan money to my son. I understand that loans within family are a sticky business as far as the IRS is concerned. I want to charge him zero interest or very little. Is it true I can loan at a given interest and then forgive that loan interest at the end of the year if we have a written agreement? Are there limits to the amount I can give or loan without huge tax liabilities?



The isssue with the loan to your son without interest is that the IRS could deem the loan a gift and if the loan is greater than $12k gift tax could apply.



A better approach is probably to make the loan bona fide by using a pomissory note and charging appropriate interest. Gifts could also be used but should not be promised or at all related to the loan interest.



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