Gift or loan? How to decide
Is it better to gift or loan money to family?
It depends on three things: whether you might want the money back, the tax exposure, and the purpose. A gift is simplest when it's cash within the annual exclusion and you have no expectation of repayment. A documented loan at the AFR is better when you'd like it recoverable, want it to survive the recipient's divorce as a debt, or it's large relative to the $19,000 exclusion. The tool above weighs these for your situation.
How much money can I give my child tax-free?
In 2026 you can give up to $19,000 per recipient ($38,000 for a married couple splitting gifts) with no gift tax and no filing. Larger gifts require a Form 709 and draw on your ~$15M lifetime exemption — they rarely mean tax actually owed.
Does the IRS treat a family loan as a gift?
Only if you don't document it or charge too little interest. A bona-fide loan with a written note at or above the Applicable Federal Rate (AFR) is a loan, not a gift. Charge below the AFR and the IRS treats the shortfall as imputed interest — a small gift each year.
Is it better to give my kids money now or as an inheritance?
Giving while you're alive lets you see the impact and help when it matters most — a down payment, a degree, a debt cleared. But there's a tax nuance: for appreciated assets (low-basis stock, property), gifting now hands your heir a carryover basis and a future capital-gains bill, while letting it pass at death resets the basis (the "step-up"). For cash, give now; for appreciated assets, often hold. The tool flags this.
Should I gift or loan money to help my child buy a house?
A documented loan at the AFR is often the smartest route for a down payment: it's recoverable, it survives a divorce as a debt rather than divisible marital property, and you can forgive a slice each year (up to the annual exclusion) as a planned, tax-free gift. If you'd rather gift it outright, you'll need a gift letter for the lender.
General information, not tax or legal advice. Exclusion, exemption, and AFR figures change; verify current numbers with the IRS and consult your CPA or attorney.