Gift from Parents

What is the name of your state? Arizona

I received money from my parents this past year in order to pay off debt, approximately $30,000. They took out an equity loan in order to pay for this. Beginning next year, I will begin paying off the equitly loan for them.

Is this subject to any sort of tax?

Thanks in advance.

cfuller03 said:

What is the name of your state? Arizona

I received money from my parents this past year in order to pay off debt, approximately $30,000. They took out an equity loan in order to pay for this. Beginning next year, I will begin paying off the equitly loan for them.

Is this subject to any sort of tax?

Thanks in advance.

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Yes and no. Your parents made you a loan, and you are now begining to make payments on that loan.

Your parents will be able to claim the interest on the home equity loan as a deduction on their tax return, on schedule A. They will also need to report interest income from you (the amount of interest that you pay when you make the loan payments) as interest income.

So, it will end up being a wash for your parents. However, if they don't itemize because they do not have enough to itemize, or the interest on the loan does not fully fall above the standard deduction level, then in reality its going to cost your parents some tax on interest income.