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Level 3
posted Mar 3, 2024 7:34:52 PM

I need to loan money without tax consequence when paid back

I need to loan $1,000 to a relative (for a plumbing repair on their home). My concern is that when I'm paid back it might count as taxable 'income' as part of my 'gross income'. Should I or should I not charge some sort of nominal interest rate, such as 1% per year?

0 2 766
2 Replies
Expert Alumni
Mar 3, 2024 7:44:41 PM

A loan repaid is not considered income, so no worries there.  However, if you do charge interest, the interest is considered income to you.   

Level 15
Mar 3, 2024 10:34:04 PM

The loan amount is below the threshold (code section 7872) for charging interest on a related party loan. Thus whether you want to charge interest is up to you.