Comments on: If you borrow $19,000 from someone to pay off some credit debt, can you be liable for taxes on this?

By: Lisa A

Lisa A — Mon, 11 Jan 2010 19:57:27 +0000

Your mom will owe taxes on the interest income that your sister pays her. Your sister is getting a loan, not a gift, and not income, so no taxes are due on her end.

By: AuditChick84

AuditChick84 — Sun, 10 Jan 2010 00:43:47 +0000

Debt is not income.

By: bud68

bud68 — Fri, 08 Jan 2010 10:20:50 +0000

No. But your mom could be liable for gift tax.

By: hanging head in debt

hanging head in debt — Thu, 07 Jan 2010 19:50:00 +0000

If they do sign a contract, make sure they get it notorized and filed with your county clerks office in case the IRS does come asking about it!!!!

By: David M

David M — Thu, 07 Jan 2010 19:09:34 +0000

If she defaults on the loan whatever she doesn’t pay back can be considered income and a loss to your mother which she could writ off on her taxes.

By: Auntie Mame

Auntie Mame — Thu, 07 Jan 2010 04:23:11 +0000

It is not a gift nor is it income, it is just a loan. No taxes due. However, sister and mom should each sign a paper indicating that this is a loan to be repaid in monthly payments of $317 each over the next 5 years, just in case the IRS should ask either one about it. Without an agreement to be repaid, it is a gift and subject to gift tax.