Parents want to give me money

What is the name of your state? ID

I live in Idaho and I owe about $50,000 still on my house. At my current payoff rate it will take me about nine years to pay this off and I'll pay about $30,000 to $40,000 in interest.

My mother has quite a bit of money and has agreed to pay off the whole $50,000 for me and I'll then make payments to her instead. I intend to pay her $60,000 ($1000 a month for 5 years) which will still be a huge savings for me.

Is there a way for us to do this without the IRS or someone like wanting us to pay taxes on it. If it matters I'm divorced and single and so is she.

As long as you have a legitimate note and actually make the payments to your mother, there are no tax issues for you unless the interest is below market rate; you are just refinancing a mortgage. Your mother will have to report interest income.

Theoretically, your mother could "forgive" the payments each year and not have to file a gift tax return. This assumes the $1,000 per month payment as you mentioned. This would not be income to you.

Your mother has to declare & pay tax on a "reasonable interest rate" even if the actual interest rate is less than that.

BTW, get a lawyer to draw up the loan documents so that everything is properly phrased & recorded. This will protect both of you.

abezon said:

Your mother has to declare & pay tax on a "reasonable interest rate" even if the actual interest rate is less than that.

BTW, get a lawyer to draw up the loan documents so that everything is properly phrased & recorded. This will protect both of you.

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The mother can forgive the amount of "reasonable interest" - thus making it a yearly gift of whatever the interest would have been.