Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
11-27-2017 07:23 AM
Solved! Go to Solution.
11-27-2017 11:09 PM
Welcome to the H&R Block community.
Gifts will not affect you in this situation. If you don't want to charge the interest then don't charge it. If you end up not charging the interest then you simply don't have any interest income to report. What the loan document says is irrelevant, it's whether or not you actually realize the income that matters. So long as you have a record of the amount repaid each year and how much of it was principal and how much was interest that is sufficient proof of how much interest income, if any, you have to report.
The good news when it comes to gifts is that they are not ever taxable to the recipient, and that you would have to have a pretty large estate to actually have to pay the estate/gift tax later on. You do, however, have to file a gift tax return if you give total gifts in excess of $14,000 to the same person in the same year.
So the easy way to deal with this is simply to not charge any interest when you're paid on time. Apply the entire payment to principal and show that on your records. You won't have to report anything on your tax return as far as interest is concerned, and you won't have to worry about keeping track of gifts.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)