Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Is cosigner paying off a loan a gift?
Old 10-07-2008, 07:19 AM   #1
Dryer sheet wannabe
Join Date: Jul 2007
Location: Nashville
Posts: 24
Send a message via AIM to tpcooper Send a message via Yahoo to tpcooper
Is cosigner paying off a loan a gift?

Time for me to sound like a spoiled brat.
My parents contacted me yesterday and offered to pay off half my student loan balance, or about $55,300.

That pays off exactly 3 of my individual loans. One of them my dad is a cosigner for. I know gift tax rules apply to the other amounts, but since he is a cosigner, does gift tax even apply to that? I'm not trying to skirt taxes, but if he doesn't need to include that when he reports the gift I don't want him to. BTW, I doubt he has to worry about breaching the $1 mil lifetime exclusion anyway, this probably isn't going to matter.


tpcooper is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-08-2008, 08:17 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,019
no expert, but if dad is equally liable for that particular loan, i.e. fully joint liability as a co-signer, it would seem to be a loan payoff, nothing more.
dh2b and i share a joint credit card, and pay it off from a joint checking account. i don't consider that a gift arrangement.
<shouts> is there a banker in the house?

"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Old 10-08-2008, 08:43 PM   #3
Thinks s/he gets paid by the post
73ss454's Avatar
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,378
If you had the benefit of the loan and Dad pays it off I consider that a huge gift. Don't know about the tax end.
73ss454 is offline   Reply With Quote
Old 10-08-2008, 08:47 PM   #4
Moderator Emeritus
Martha's Avatar
Join Date: Feb 2004
Location: minnesota
Posts: 13,211
Gifts are not the recipient's tax issue, it is the giver's issue, with gifts in excess of $12,000 in one year requiring a gift tax return by the giver. Parents together can give up to $24,000 in one year with no return needed. Even if a return is filed, that does not mean a tax is paid. The gift amount likely will just come off the estate tax exemption.

Money for education can be exempt from the gift rules, but I don't know if paying off student loans would fit the exemption.

No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 10-08-2008, 09:12 PM   #5
Dryer sheet wannabe
Join Date: Jul 2007
Location: Nashville
Posts: 24
Send a message via AIM to tpcooper Send a message via Yahoo to tpcooper
The answer I got from a CPA is that by default IRS the considers a cosigner to a loan paying it off for the main borrower (this is my language) a gift. He added that if the parent can legitimately argue they always considered it their obligation and intended to pay it off and does, not counting it as a gift should be acceptable.

I suggested to my dad that he either split the gift between years or use some of his lifetime exemption. I don't want him going into something that isn't black and white with the IRS for my benefit. (I know he owes the tax, not me, but it is because of/for me)

Just to make sure I'm not misunderstood, I do consider this to be a huge personal gift, my only concern is making sure the tax part is handled right.
tpcooper is offline   Reply With Quote
Old 10-08-2008, 09:28 PM   #6
Recycles dryer sheets
Join Date: Sep 2008
Posts: 60
I agree with others that this would be considered a gift and would have tax consequences for your parents. If I were in your shoes, I would recommend they each gift you $12,000 in 2008, and come January 1st, 2009, gift you another $12,000 each.

Uncle Drew is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Gift Cards mickeyd FIRE and Money 19 12-26-2007 10:20 PM
Gift Cards mickeyd FIRE and Money 40 11-30-2006 08:42 PM
The Best Gift Danny Other topics 24 12-29-2005 05:44 PM
IngDirect paying 2.6% FunGoals FIRE and Money 30 03-10-2005 03:31 AM
ER Christmas Gift REWahoo Other topics 25 12-28-2004 03:25 AM


All times are GMT -6. The time now is 11:11 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.