auto

7 tips for taking a car loan from family

Understand tax laws
Next
3 of 8
Back
text

It's important for the lender to record the transaction as a car loan and not a gift, Kresh says. Otherwise, the lender would be considered a donor in the eyes of the Internal Revenue Service, and they may have to pay gift taxes if the transfer of money is greater than $13,000, he says.

Another tax concern to consider is the interest charged on the car loan. "If the lender doesn't charge interest (at market rates), then the IRS may consider the exchange a gift," Kresh says.

There also can be tax implications for borrowers who don't repay auto loans from relatives or friends. The IRS may consider a forgiven loan as income and try to collect income tax, Kresh says. His advice for all parties is to talk to a tax expert before making any large-scale exchange of money.


 

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
 

A little research could save you BIG on interest.

Don't have time? Our rate-tracker tool saves you time and money. Delivered Thursdays.
 
advertisement
Partner Center
advertisement

Blog

Tara Baukus Mello

Save money on gas over Labor Day

Wal-Mart has jumped on the gas savings bandwagon with its Great Gas Rollback program.  ... Read more


Connect with us