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Question

Any tax implication for borrowing $300,000 from family to buy a home property?

Forum|Forum|3 years ago
December 11, 2022
2 replies
0 views

If I don't pay any interest, there would be no tax implications on either side?

If I do pay interest, then my family will have to report interest income to IRS?

I look forward to hearing from you.

Thanks.

@april4mar - yes, there are tax implications.

here is one article on the topic

https://www.greensfelder.com/trusts-and-estates-blog/irs-publishes-afrs-for-may-2022#:~:text=The%20Internal%20Revenue%20Service%20has,loans%20to%20avoid%20tax%20complications.&text=The%20Section%207520%20interest%20rate%20for%20May%202022%20is%203.0%20percent.

here are the current IRS rates. Generally, the interest rate on the loan has to be in the 5% range to avoid tax issues.

https://www.irs.gov/pub/irs-drop/rr-22-22.pdf

See a lawyer.

The major tax implication of an interest-free loan of that size is what's called "imputed interest." This TurboTax help article explains:

https://turbotax.intuit.com/tax-tips/tax-payments/irs-tax-rules-for-imputed-interest/L7UbulHpC

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

april4marAuthor

Very educational. Thank you.