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Posted: 3/27/2024 11:31:34 PM EDT
[Last Edit: SilverBearX]
I am looking at buying my son a car. I would be taking out a loan, (have cash to cover it, but would rather keep the cash for emergencies).
He is going to be making the payments on the car, and when it is paid off, it will be his. Need some help figuring out the tax implications of this. Do his payments count as income to me? ETA- He has a good job, and is diligent in it,, but it requires a commute. I am just trying to help him get solid transportation. Any advice is appreciated. |
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Posted: 3/27/2024 11:34:22 PM EDT
[#1]
 Just have him get the loan... Builds his credit ect. |
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WA, USA
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Posted: 3/27/2024 11:34:53 PM EDT
[#2]
No him repaying a debt to you isn’t income
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USA
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Posted: 3/27/2024 11:35:17 PM EDT
[#3]
Originally Posted By SilverBearX: I am looking at buying my son a car. I would be taking out a loan, (have cash to cover it, but would rather keep the cash for emergencies). He is going to be making the payments on the car, and when it is paid off, it will be his. Need some help figuring out the tax implications of this. Do his payments count as income to me? ETA- He has a good job, and is diligent in it,, but it requires a commute. I am just trying to help him get solid transportation. Any advice is appreciated. Only if you make a profit out of the transaction. Otherwise it's not a tax event. |
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Posted: 3/27/2024 11:35:17 PM EDT
[#4]
Quote HistoryOriginally Posted By whiteryno: Just have him get the loan... Builds his credit ect. |
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Posted: 3/27/2024 11:35:45 PM EDT
[#5]
Quote HistoryOriginally Posted By UndercoverFed: No him repaying a debt to you isn’t income Even if the car is in my name? |
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Posted: 3/27/2024 11:36:59 PM EDT
[#6]
Quote HistoryOriginally Posted By whiteryno: Just have him get the loan... Builds his credit ect.We are working on building his credit. He is just getting started in life. Skipped college and went straight into the trades. No drugs, no smoking, no drinking. Incredibly good young man. He can't get a loan. |
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Posted: 3/27/2024 11:37:26 PM EDT
[#7]
Quote HistoryOriginally Posted By whiteryno: Just have him get the loan... Builds his credit ect.Do this |
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Posted: 3/27/2024 11:38:59 PM EDT
[#8]
Quote HistoryOriginally Posted By Couch-Commando: If you're willing to do what you say in the OP, you should also be willing to cosign. Which solves all of these problems. Quote HistoryOriginally Posted By Couch-Commando: Originally Posted By whiteryno: Just have him get the loan... Builds his credit ect.Yes, that is the strange thing. I have over 800 credit score, but as a cosigner the loan was rejected, but I am confident I could get it with me as primary. |
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Posted: 3/27/2024 11:40:36 PM EDT
[Last Edit: OSUBeaver]
[#9]
Quote HistoryOriginally Posted By SilverBearX: We are working on building his credit. He is just getting started in life. Skipped college and went straight into the trades. No drugs, no smoking, no drinking. Incredibly good young man. He can't get a loan. NM. Saw your post about cosign not approved |
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Posted: 3/27/2024 11:41:30 PM EDT
[#10]
Quote HistoryOriginally Posted By UndercoverFed: No him repaying a debt to you isn’t income He is not repaying it to me, he is repaying it to the bank in place of me, for a car in my name until it is paid off. Maybe I should pursue a different route as it seems more convoluted than I originally thought. |
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FL, USA
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Posted: 3/27/2024 11:42:44 PM EDT
[#11]
See if you can get the lender to put the loan in his name and cosign the loan. Him paying a loan you take out should not cause any problems but it doesn't help him establish any credit either. |
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USA
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Posted: 3/27/2024 11:43:50 PM EDT
[#12]
Curious if you do the loan in your name only will the bank require you to carry the car insurance?
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Posted: 3/27/2024 11:44:49 PM EDT
[#13]
I wouldnt spend another minute worrying about it. People do it all the time and have never heard of the irs knocking on someone's door about financing a car for their kids
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FL, USA
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Posted: 3/27/2024 11:45:18 PM EDT
[#14]
Quote HistoryOriginally Posted By SilverBearX: Yes, that is the strange thing. I have over 800 credit score, but as a cosigner the loan was rejected, but I am confident I could get it with me as primary. I know everything is automated and there's a app for it now days but do you not have a working relationship where you bank. |
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Posted: 3/27/2024 11:47:56 PM EDT
[#15]
Quote HistoryOriginally Posted By CTM1: Curious if you do the loan in your name only will the bank require you to carry the car insurance? He is on my insurance and will be listed as the primary driver. |
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Posted: 3/27/2024 11:48:53 PM EDT
[#16]
Quote HistoryOriginally Posted By SilverBearX: We are working on building his credit. He is just getting started in life. Skipped college and went straight into the trades. No drugs, no smoking, no drinking. Incredibly good young man. He can't get a loan. Cosign. |
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Posted: 3/27/2024 11:49:20 PM EDT
[Last Edit: Drumbic]
[#17]
Repaying a debit does NOT count as income to you.
You kid wouldn't be paying you, he would pay the loan and is not paying you back anything. The loan holder doesn't give a shit who is paying as long as they get their money. You taking the loan only helps your credit, not his. It is your loan. He gives up on paying the loan, you're still on the hook for it. |
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Posted: 3/27/2024 11:53:52 PM EDT
[#18]
Shop around for a more cooperative lender. With your credit as a co-signer it should be doable.
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TX, USA
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Posted: 3/27/2024 11:58:21 PM EDT
[Last Edit: bayouhazard]
[#19]
Quote HistoryOriginally Posted By pmo12: Only if you make a profit out of the transaction. Otherwise it's not a tax event. If a bank pays me interest on a savings account, that's taxable income, but if I pay interest to a bank for a loan, that's not deductible from my income. On a completely different note... Practically speaking, the IRS doesn't track cash payments between individuals, particularly immediate family, although COC #4 precludes me from suggesting any course of action. 
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WV, USA
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Posted: 3/28/2024 12:02:54 AM EDT
[#20]
Have him co-sign your loan?
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Posted: 3/28/2024 12:09:46 AM EDT
[#21]
Too late to help now but if you are a parent with a credit card you pay in full every month (or keep at a lower balance) you should get your kids an additional user card as soon as the bank allows. My kids have been on a card account with 50k limit for years, 5-10k spending a month paid in full, the cards with their names on are locked in a safe. When they are done with college they will have a strong credit report, and if they fuck it up after that it’s on them.
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USA
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Posted: 3/28/2024 12:09:51 AM EDT
[#22]
Quote HistoryOriginally Posted By bayouhazard: If a bank pays me interest on a savings account, that's taxable income, but if I pay interest to a bank for a loan, that's not deductible from my income. On a completely different note... Practically speaking, the IRS doesn't track cash payments between individuals, particularly immediate family, although COC #4 precludes me from suggesting any course of action. Right. When the bank pays you interest that is profit, to you. You pay taxes on it. When the bank gets interest from you, they pay taxes on it because it is profit to them. In this case, it's a 0% loan so no profit to you. If you charge your son over what you pay back, then it would be taxable and the IRS would not give even the vaguest fuck. If you charge your son less than the loan, then he would be profiting and again the IRS wouldn't give the slightest fuck either way. |
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Posted: 3/28/2024 12:13:43 AM EDT
[#23]
Quote HistoryOriginally Posted By SilverBearX: Yes, that is the strange thing. I have over 800 credit score, but as a cosigner the loan was rejected, but I am confident I could get it with me as primary. |
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Posted: 3/28/2024 12:14:08 AM EDT
[#24]
Quote HistoryOriginally Posted By nightstalker: Shop around for a more cooperative lender. With your credit as a co-signer it should be doable. This. You wanna help him? If he is making the payments, help him build his credit. You want to really help him? Teach him to pay cash for cars and not finance depreciating assets. |
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Posted: 3/28/2024 12:16:09 AM EDT
[#25]
If the car is in your name and the insurance is in your name, and he's making repayments directly to you.. how the hell would anyone know there was anything going on in the first place?
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Posted: 3/28/2024 12:21:13 AM EDT
[#26]
Quote HistoryOriginally Posted By SilverBearX: He is not repaying it to me, he is repaying it to the bank in place of me, for a car in my name until it is paid off. Maybe I should pursue a different route as it seems more convoluted than I originally thought. You're overthinking in an effort to virtue signal your willingness to be obedient. The bank doesn't care who makes the payments, the person on the paperwork will own the item regardless. It also won't reflect in any way in his financial whatever's. He won't get good credit, or any acknowledgement whatsoever. I know this because I know of several instances where someone else made payments on something. I actually took over payments for something when I first graduated because the person had moved. Eventually I applied to the company so I would own the item, basically it was "sold" to me. And who gives a shit about willingly paying taxes. If you sold a gun would you report yourself to the IRS? |
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Posted: 3/28/2024 12:28:29 AM EDT
[#27]
Quote HistoryOriginally Posted By FALARAK: This. You wanna help him? If he is making the payments, help him build his credit. You want to really help him? Teach him to pay cash for cars and not finance depreciating assets. He is 19 and commuting 30+ miles each way in a 2004 car. Yes. That is a good lesson, but another lesson is you do what you have to do to be a reliable employ with a reliable ride. |
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Posted: 3/28/2024 12:39:04 AM EDT
[#28]
Quote HistoryOriginally Posted By SilverBearX: He is 19 and commuting 30+ miles each way in a 2004 car. Yes. That is a good lesson, but another lesson is you do what you have to do to be a reliable employ with a reliable ride. Quote HistoryOriginally Posted By SilverBearX: Originally Posted By FALARAK: This. You wanna help him? If he is making the payments, help him build his credit. You want to really help him? Teach him to pay cash for cars and not finance depreciating assets. He is 19 and commuting 30+ miles each way in a 2004 car. Yes. That is a good lesson, but another lesson is you do what you have to do to be a reliable employ with a reliable ride. I understand. Especially if his current vehicle is unreliable. I also understand I never owned a vehicle that cost more than $2500 until I was 28. I bought older but good quality Honda's and Toyota's. I only ever made payments on a single vehicle, and that was back in 1998. I currently drive a 2007 model F150. I never had a commute under 30 minutes my whole working life. Life is all about choices. |
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Posted: 3/28/2024 12:57:33 AM EDT
[#29]
Quote HistoryOriginally Posted By whiteryno: Just have him get the loan... Builds his credit ect.And do this again. Tax Burden OP?  How many more kids you have OP? |
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Posted: 3/28/2024 1:00:49 AM EDT
[Last Edit: MilHouse-556]
[#30]
Wait, you think co-signing for your son on a vehicle changes your tax liability?
Be smart, give them a hand me down vehicle or just help him get a clunker for cheap. They'll just F up the first vehicle anyways and it could be a bonding moment to maintain/fix it together. |
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Posted: 3/28/2024 1:07:42 AM EDT
[#31]
You could give anybody up to $17,000 a year without any tax implication
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Posted: 3/28/2024 1:17:11 AM EDT
[Last Edit: Jerret_S]
[#32]
Find a new bank or explain your situation better to the one that turned you down.
You aren't helping his credit if he isn't on the loan. When I was 19 I did the same thing with my dad. I bought a 3 year old at that time S10 truck for $7000. I could have paid cash but my dad wanted me to start up my credit so we went to the bank and I was turned down since I had no credit at all. He cosigned, as was his plan anyways,and I got $5k in a loan that I paid $147 or whatever a month for 3 years on. Bank manager said to pay it off like that and not early. I bought my own house at 26 with almost 800 credit score. |
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Posted: 3/28/2024 1:20:39 AM EDT
[#33]
Quote HistoryOriginally Posted By SilverBearX: He is not repaying it to me, he is repaying it to the bank in place of me, for a car in my name until it is paid off. Maybe I should pursue a different route as it seems more convoluted than I originally thought. Try a credit union. |
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Posted: 3/28/2024 1:21:56 AM EDT
[#34]
Can you cosign the loan for him so he can build his credit?
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Posted: 3/28/2024 1:23:14 AM EDT
[#35]
Quote HistoryOriginally Posted By FALARAK: I understand. Especially if his current vehicle is unreliable. I also understand I never owned a vehicle that cost more than $2500 until I was 28. I bought older but good quality Honda's and Toyota's. I only ever made payments on a single vehicle, and that was back in 1998. I currently drive a 2007 model F150. I never had a commute under 30 minutes my whole working life. Life is all about choices. Quote HistoryOriginally Posted By FALARAK: Originally Posted By SilverBearX: Originally Posted By FALARAK: This. You wanna help him? If he is making the payments, help him build his credit. You want to really help him? Teach him to pay cash for cars and not finance depreciating assets. He is 19 and commuting 30+ miles each way in a 2004 car. Yes. That is a good lesson, but another lesson is you do what you have to do to be a reliable employ with a reliable ride. I understand. Especially if his current vehicle is unreliable. I also understand I never owned a vehicle that cost more than $2500 until I was 28. I bought older but good quality Honda's and Toyota's. I only ever made payments on a single vehicle, and that was back in 1998. I currently drive a 2007 model F150. I never had a commute under 30 minutes my whole working life. Life is all about choices. Northeast salt laughs at you. Try fixing or paying a mechanic to fix a $2500 truck 15 year old truck up here once. You non salt guys have no idea how much I would like to be in your shoes. |
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Posted: 3/28/2024 1:25:19 AM EDT
[#36]
Quote HistoryOriginally Posted By SilverBearX: We are working on building his credit. He is just getting started in life. Skipped college and went straight into the trades. No drugs, no smoking, no drinking. Incredibly good young man. He can't get a loan. Does not compute.
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Posted: 3/28/2024 1:53:00 AM EDT
[Last Edit: mousehunter]
[#37]
Gifts are not taxable to the recipient. Principle payments are not taxable to the lender. Interest on a loan is taxable (a potential snag). Forgiveness of debt is taxable if you issue him (and the IRS) the appropriate 1099 forgiveness of debt. There are several issues that can arise if the IRS wants to be assholes. They would involve the IRS saying the gift is really a loan and that the interest income should be implied and taxed - but is being given back to the recipient as a gift. I doubt the IRS would care on a car loan amount to a family member, but they might care on a home loan or business loan amount. Understand this is kind of the mental gymnastics as jailing a Mob Boss on tax evasion. Kind of like if Trump had a son getting "gifts" like Biden's son gets gifts.
--- Gifts are not directly taxable to the giver, but excess gifts are required to be added back into the value of an estate when an estate tax return is required. |
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IA, USA
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Posted: 3/28/2024 2:27:27 AM EDT
[#38]
He gets the loan you co-sign.
Probably want the GAP insurance in case it gets totaled. |
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USA
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Posted: 3/28/2024 2:43:52 AM EDT
[#39]
I’m not an accountant, not a lawyer, nor a tax guru…so here’s my 2 cents.
It’s not a taxable event. Where you’re on the hook is the vehicle is registered to you. Even if he has his own insurance, on your insurance and he’s the primary driver, legally you can be held liable if he gets into an accident. You’re going to need to get a lawyer to put that vehicle owned/registered by a trust to protect your assets. It’s what I did with both my vehicles. When my teenagers start driving, the trust and insurance company is liable. It’s just a separation between myself and the vehicle. The only thing is that I think the vehicle needs to be completely paid off. Find an estate planning attorney. |
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CO, USA
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Posted: 3/28/2024 2:49:54 AM EDT
[#40]
He should get an $8000 used Toyota.
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Posted: 3/28/2024 4:08:45 AM EDT
[#41]
I did something similar for my sister. I spoke with the bank about the best way to minimize my liability. She carried the insurance on it and the bank had a specific way they listed our names on the title. I don’t recall the exact wording, but it basically meant that she was the holder of the property and I was the person making the payments.
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Posted: 3/28/2024 4:32:03 AM EDT
[Last Edit: sitdwnandhngon]
[#42]
Quote HistoryOriginally Posted By SilverBearX: We are working on building his credit. He is just getting started in life. Skipped college and went straight into the trades. No drugs, no smoking, no drinking. Incredibly good young man. He can't get a loan. Quote HistoryOriginally Posted By SilverBearX: Originally Posted By whiteryno: Just have him get the loan... Builds his credit ect.We are working on building his credit. He is just getting started in life. Skipped college and went straight into the trades. No drugs, no smoking, no drinking. Incredibly good young man. He can't get a loan. He can if you co-sign. Try a better lender if one denied you. |
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Posted: 3/28/2024 4:40:30 AM EDT
[#43]
Quote HistoryOriginally Posted By SilverBearX: He is not repaying it to me, he is repaying it to the bank in place of me, for a car in my name until it is paid off. Maybe I should pursue a different route as it seems more convoluted than I originally thought. Working through something similar myself. Kid has no credit and can't get a loan. The loan is in my name. HIS name is in the registration so when it is paid off, we don't have to fuck around with changing the name on the title, registration, sales tax etc. |
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Posted: 3/28/2024 4:49:08 AM EDT
[Last Edit: Makarov]
[#44]
Technical answer: If he is simply paying you back, it is not income. If he is paying you back with interest, the interest paid over a year would be income for that year. You can run a simple amortization schedule to compute this.
Better answer: Money exchanged between immediate family (within limits) is generally not reported or taxed. The only tick may be if your son pays you cash and you are depositing an aggregate $10K or more in cash over a year, your bank is required to report that to the IRS. That may trigger a review or audit. Best answer: As others suggested, co-sign for the loan in your son’s name. It helps him build his credit score/history and helps keep money issues from becoming family issues. ETA- Co-signing also puts the title in your son’s name (as well as the responsibility for insurance). This will be an important factor if your son is ever involved in a car accident (his fault or not). Personal injury lawyers will go after the titled owner of the car, as well as the driver, particularly if they believe you have deep pockets. Co-signing would generally limit your personal liability to the balance of the loan (at worst). I say “generally” because never underestimate the power of predatory/frivolous lawsuits to fuck up your life. |
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Posted: 3/28/2024 5:12:06 AM EDT
[#45]
Quote HistoryOriginally Posted By whiteryno: Just have him get the loan... Builds his credit ect. |
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TX, USA
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Posted: 3/28/2024 5:35:54 AM EDT
[#46]
Well the IRS wouldn't know WTF you were doing until you just posted about it online for them to find out.
Stop living your life worrying about how you can kiss Uncle Sams ass, and make him kiss yours. |
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FL, USA
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Posted: 3/28/2024 6:20:40 AM EDT
[#47]
If your not getting the loan as a business, there isn't anything convoluted about it.
If I leased an apartment for $800/month, and lived there, and subleased a room to you for $400 per month, it's not income for me. Same same, you took out an auto loan for $500 per month, and your flesh and blood son pays the $500/month payment, and he maintains control of the car, you received no income in the transaction. |
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Posted: 3/28/2024 6:40:12 AM EDT
[#48]
Quote HistoryOriginally Posted By MilHouse-556: Wait, you think co-signing for your son on a vehicle changes your tax liability? Be smart, give them a hand me down vehicle or just help him get a clunker for cheap. They'll just F up the first vehicle anyways and it could be a bonding moment to maintain/fix it together. He has a 2004 Lexus that I bought him in 2022. He paid me back in less than 8 months. Not his first car. |
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NY, USA
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Posted: 3/28/2024 6:47:09 AM EDT
[#49]
Was gonna post a reply, but when I saw "I have over an 800 credit score" I decided to just move along.
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Posted: 3/28/2024 7:35:54 AM EDT
[#50]
Quote HistoryOriginally Posted By Mech2007: Was gonna post a reply, but when I saw "I have over an 800 credit score" I decided to just move along. If you dont have a comment involving the tax question, then that is probably best. |
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