Hi all. My dad recently came into some money and has very generously offered to help me out by paying off the remaining balance on my student loans. The payoff amount is more than 5k but less than 10k. He is concerned that if he makes this payment for me it will be considered a “gift” and that I could potentially have to pay taxes on it. Neither of us really knows who to ask to find out if this is true. Is anyone here willing to give some insight? Much appreciated.
Question about Student Loan payments
byu/thelousychaperone intax
Posted by thelousychaperone
2 Comments
No gift reporting needed and no gift tax. Gift tax due is very rare. Your annual life time exlcusion is over 13 million and adjusted for inflation. Gift tax reporting is required when a gifdt to a person is over 19k and also adjusted for inflation.
It IS a gift, which means you don’t pay tax on it – gifts are not income under the tax code.
There is a gift tax, but except in the rarest of circumstances, to the extent any is due, it is paid by the donor, not the recipient. But gift tax is rarely ever actually due for anyone. A person can give away up to $19k (currently) per year to any other person and not report it or have any worry about gift tax. Additionally, every person has $15 million (currently) that they can give away cumulatively during their lifetime before they pay any gift tax (this is for gifts over the $19k or that don’t qualify as present interests to individuals). Those gifts have to be reported, but until it’s over $15 million, there’s no tax.
Since your gift from your father is less than $19k, your father doesn’t have to report it and you both go on your merry way.