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Should you gift or loan money to family?

When you help your kids or grandkids, how you give matters as much as how much. Answer a few questions and get a recommendation: an outright gift, a documented loan at the AFR, a 529 contribution, or direct-pay. The gift-tax (Form 709), AFR and fairness math is done for you.

Part of Family Matters' Living Inheritance tools, for giving while you're alive.

Who are you helping?

A few things that change the answer:

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    ℹ️Decision support, not tax or legal advice. Check with your advisor.

    Track every gift, loan & 529 in one place.

    Family Matters keeps the record of whichever you choose: the gift letter or promissory note, the AFR and amortization, the Form 709 records, and a fairness view across all your kids. Try it free for 45 days.

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    Gift or loan? How to decide

    Is it better to gift or loan money to family?

    Three things decide it: 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 is 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 gift to the borrower, counted once when you make the loan.

    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 catch. 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.

    Keep reading

    Family loan vs. gift: the tax difference Gift now vs. inherit later (step-up basis) Gift Tax & Form 709 Calculator Family Loan Calculator (AFR + amortization) Gift Letter Generator Gifting & gift tax: how it works Intra-family loans: how they work Give money without losing control

    General information, not tax or legal advice. The exclusion, exemption and AFR change, so check the current numbers with the IRS and your CPA or attorney.