General Question

isorabins's avatar

Can my mom give me $3000 as a tax-free gift to help me start a business? (I'm 26.)

Asked by isorabins (50points) December 25th, 2007

I'm trying to talk my mom into giving me some startup cash for a small business, and I'm wondering if she can claim it as a tax-free gift. If so, would I have to claim it as income? What are the tax implications if it was a loan instead of a gift?

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7 Answers

Funkmonk's avatar

If it’s a gift from someone else it’s tax free. It’s yours. (I’m talking from the UK here though). I’m 18 and if I get money from a relative it’s mine. No taxing. I don’t see why it should be any different if your mum gives you money for your business. If it was a loan you would have to pay back more than you accepted right?

Think of it as a charity donation, they aren’t taxed.

Although if your mum does give you the money remember to give her more back if you’re successful ^_^

gailcalled's avatar

In the US for calendar year 2007 (this may carry to 2008) one can give $12,000 to as many individuals as he wants. Neither giver nor receiver pays taxes. Loans are different; there are legal low limits on interest required; that varies according to the prime rate. And you have to file papers. You pay off the loan and whatever interest you agree on (and the law allows) on a regular schedule. No tax implications, I don’t think, for that amount since it is not a mortgage. Your mom gets the original $3000 back plus the interest. Check out the IRS sites.

If your mother gives you $3000, it is a gift. However, under present law (which may change in 2010) she can give away $1 million tax-free during the course of her lifetime.$12,000 to 83 people this year would use it all up.

cwilbur's avatar

If you’re thinking of starting a business, you need an accountant. And this is precisely the sort of question you should ask that accountant, because answers can vary considerably and advice from an accountant who knows the law is far preferable to answers from random people online.

gooch's avatar

your good

gailcalled's avatar

Cwilbur has a good point. You are really asking two questions; the first, about tax-free monetary gifts is straightforward (see my answer above), but I don’t know anything about starting a business. Of course, you need to talk to a CPA. Sorry, I didn’t mean to be misleading.

ironhiway's avatar

Your mother (in the USA) can give you a tax free gift of up to 10,000 per year. It’s not tax free to her though. As a loan, you pay no taxes on the loan she again would get no tax benefit’s. Though of course she would pay taxes on any interest she earns.

You may want to consider her making an investment in your venture, if it fails she can write it off. If it succeeds she gets to share in the profits and see her son shine.

5 Legal and Finance Tips for Startups: The Boring Stuff That Must be Done Right

gailcalled's avatar

@ironhiway; the legal amount in the US is now $12,000 tax-free gift to each individual.. That gft is indeed tax-free for both the receiver and the giver unless s/he has already given away $1 million.

$ gift info

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