Can my boyfriend pay my student loan of $20,000 without either of us having to pay income taxes? (US or Mich)?

Question

My boyfriend has offered to pay $20,000 of my student loan debt, which totals $25,000. If he pays directly to the lender, would either of us owe income tax for the $20,000?

Answer 1

It would not change either of your income taxes. It would be considered a gift to you, so he might want to consider paying off $12,000 of it this year, then the other $8K next year so he doesn't have to file a gift tax return.

Answer 2

definite, that's a private loan, meaning there is not any longer earnings to the recipient while the non-public loan is made, and there is not any longer earnings to the lender while the non-public loan is repaid. the subject is documenting it. case in point, say you get audited. they're going to do a financial corporation deposit diagnosis searching for unreported earnings. they're going to see $30,000 and assume it is unreported taxable earnings except you could rfile it is not any longer. you will prefer something extra considerable than a assertion "We loaned that to her in 1995." Get a financial corporation assertion, replica of a verify, or different documentation to substantiate the pass of those money. in case you don't get documentation, it is nevertheless a private loan and reimbursement, yet regrettably you heavily isn't waiting to coach that to the IRS's satisfaction. there is what's referred to as "imputed interest." which ability whether you do no longer can charge interest, interest is thought to hitch the deal (and could be stated as earnings by using the lender). even with the undeniable fact that, the interest would properly be seen part of a "present own loan." you could no longer have all the t's crossed and the i's dotted from a technical submitting viewpoint, yet once you could rfile what you have defined, there heavily isn't a extensive concern. in actuality, there will be no concern except the IRS audits your tax return for another reason.

Answer 3

Paying off a student loan does not reduce anyone's income taxes.

If he paid the school expenses, and you were his dependent, he might be able to take an education credit or deduction.

If he paid interest on the loan, and you were his dependent, then he could take a student loan interest deduction.

Answer 4

He'll owe Gift Tax for the gift since it exceeds his $12,000 annual gift exclusion amount, unless he decides to tap into his lifetime unified exclusion which I would NOT recommend he do.

It won't have any other tax consequences. He won't be able to claim the tuition deduction or student loan interest since you are not related and he is not legally obligated to pay your tuition. You won't get the deduction since you didn't actually pay it.