I wired $100,000 abroad to my parents to pay back my tuition I borrowed from them. How to do tax about this transfer?

[jacksun210]

I wired $100,000 abroad to my parents to pay back my tuition I borrowed from them. How to do tax about this transfer?

Another issue:

I select "gift" for the purpose of the transfer by mistake, because I did not find a option "repay loan".

[MinhT1]

This is a loan repayment.

There is no tax or reporting obligation for a loan repayment, even to a foreign person.

[Opus 17 · Accepted solution]

The payment of a loan (or a gift even) is not taxable to the payer.  It doesn't go on your tax return in any way. 

You can't deduct any interest as student loan interest because the lender was a family member.

Any paperwork required for financial reporting of a large wire transfer will be done by the banks.   You don't need to do anything else. 

[jacksun210]

Thanks.

I know that a bank reports every transfer greater than 10,000 to IRS.  Do I need to have the bank change "gift" to "repay loan" ?

[Opus 17]

---

@jacksun210 wrote:

Thanks.

I know that a bank reports every transfer greater than 10,000 to IRS.  Do I need to have the bank change "gift" to "repay loan" ?

---

No.

[junjun116]

To follow up this question. 

If I don't report to IRS that this is to repay a loan, how do they know that?  

According to the gift rule, only 15000 is allowed annually.  

If I transfer to my parents with 100,000 yet not file the gift return, are they going to find trouble with me as they are aware of this transfer yet not aware that it is to repay a loan. 

BTW, if my parents ( not US person) has US bank account (open remotely) , can I transfer to their US bank account to repay?  

Thanks. 

[KrisD15]

If it were a gift, you would file Form 709, but even if it were a gift, there would be no tax if you did not pass your lifetime limit. 

If it is repaying a loan, keep the documents with your tax file (such as receipts from what you paid with the loan) but you don't need to report anything. 

Yes, you may transfer the funds to a US bank. 

[junjun116]

Thank you for the further clarification. 

The loan was wire transferred to me as a whole for (1) tution fee (2)  living fee ( rental + miscellaneous) . 

So I may not have a exact record of all the expense with this money such as meal cost or shopping of supermarket, which could result in very long list. 

Especially, in the recently years, these cost may be mixed with my own income from the campus job position and  internship which may be hard to be separated from the loan. 

Instead, is that valid to show the proof of my receipt of this money from my parents. ( e.g., my bank statement during which the transfer happened, )

As a family loan, it was an oral contract originally, but we can form a writing one if that is necessary.   

[KrisD15]

Yes, that is perfect. If you have the wire of the money coming in, that would explain your wire going back out to them. No problem. 

[Opus 17]

---

@KrisD15 wrote:

Yes, that is perfect. If you have the wire of the money coming in, that would explain your wire going back out to them. No problem. 

---

I will point out here that if your parents are also US taxpayers, there are certain complications with giving an "interest-free" loan, even to family members.  If your parents are not US taxpayers, this issue is something that would be handled according to the tax laws of their home country.

[chipmario]

I have a similar issue. I'm on a non-immigrant visa (F1) in the US, and I need to send around $50000 to my parents, who live overseas, to support them financially for buying a house in their country. My parents supported me financially for my education in the US. I have two questions:

1. Is this payment of $50000 considered as a gift?

2. If so, do I have to pay gift tax or submit form 709?

[Noel43]

Since it sounds like the money your parents gave to you for education, was not a personal loan with signed paperwork and repayment schedule, then they gave you a gift and now you are now just gifting them back. A returned favor wouldn't qualify as a loan but as long as you aren't over your lifetime gift amount you won't be taxed on the 50k, but you will want to file the gift form with your taxes. The bank will handle anything required for the large transfer amount, you can always inquire about your states laws with the bank first, but usually it's just paperwork they do, and that's usually it. I am not a tax professional, but I've read a lot on this subject for my own situation. If anything I've said is incorrect feel free to enlighten me. The IRS can also inform you on the matter just by calling them too!

[Opus 17]

---

@chipmario wrote:

I have a similar issue. I'm on a non-immigrant visa (F1) in the US, and I need to send around $50000 to my parents, who live overseas, to support them financially for buying a house in their country. My parents supported me financially for my education in the US. I have two questions:

1. Is this payment of $50000 considered as a gift?

2. If so, do I have to pay gift tax or submit form 709?

---

Of course it's a gift.  It wouldn't be considered a loan repayment by the IRS unless the loan was fully documented and you were paying your parents interest, and this could create tax issues for them.

As a student on an F-1 Visa, you are considered a non-resident alien for tax purposes (not a US person) and you file a 1040-NR (non-resident) if you have taxable income.   Because you are a non-US person, you are not required to file form 709, this is only required of US citizens and US residents.

However, there are a few cases where you might be a US resident for tax purposes (such as, you made the election to file as a resident on a joint tax return with a US resident spouse, or you have been in the US longer than 5 years).  In those cases, you would need to file form 709.  Gift tax is not actually owed unless your lifetime gifts are more than $11 million.