Ask the Hammer – Gifting vs Loaning Money to Family.
The Hammer discusses gifting vs loaning money to family members.
Key Takeaways
- If parents gift money for a down payment, you keep the full amount with no repayment obligation, but your parents permanently lose access to those funds for their retirement
- Parent-to-child loans must comply with the Applicable Federal Rate (AFR)—currently allowing near 0% interest rates without triggering gift tax implications on amounts under $15,000 per person annually
- You can set custom repayment terms on intrafamily loans (5 years, 10 years, 30 years, etc.) with no government-mandated timeline, giving you maximum flexibility with your parents
- Don't count on mortgage interest tax deductions to justify taking a loan—the deduction never exceeds the actual interest cost you're paying, making it a net negative financially
- If structuring a family loan, make absolutely sure you can commit to repayment to avoid family conflict; it's better to clearly label something as a gift upfront than to promise repayment you may not deliver
Ask the Hammer - Gifting vs Loaning Money to Family: In this episode of Ask The Hammer, Jeffrey Levine discusses gifting vs loaning money to family members. Watch more episodes of Ask The Hammer at this link: https://www.finstream.tv/videos/ask-the-hammer/
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