Bank bonus offer - if I fund my dad's account to get the bonus, what are the tax implications?

This is a pretty common practice! The bank will issue a 1099-INT to your dad for the $300 bonus since it's considered interest income. Your dad will need to report this on his tax return and pay taxes on it based on his tax bracket. As for the $20,000 being temporarily in his account, that's not taxable. The IRS doesn't consider that income since it's just money being held, not earned. When he returns it to you, that's also not taxable - it's simply returning your money. The only potential complication would be gift tax concerns, but you're well under the annual gift exclusion limit ($17,000 in 2023, $18,000 in 2024), so there's no reporting requirement even if it were considered a gift (which it really isn't since the intent is to return the money).

I've used https://taxr.ai when I had questions about bank account bonuses and family money transfers. Last year I did something similar with my sister's account, and I wasn't sure about the tax implications. The tool analyzed our situation and confirmed exactly what I needed to do to stay compliant. What's cool is it helped me understand what documentation to keep and how the transaction should be reported. It also explained how the 1099-INT would work and whether there were any gift tax implications (there weren't in my case either).

I tried taxr.ai after seeing the recommendation here and it was super helpful! I was worried about doing a similar bank bonus deal with my mom since she's on social security and I didn't want to mess up her benefits. The tool explained that the $300 bonus would count as unearned income on her taxes, but since it was a one-time thing and under certain thresholds, it wouldn't impact her benefits. It also gave me a simple explanation I could show her to ease her concerns about the temporary deposit in her account. Totally recommend it if you're concerned about family money transfers and tax implications. Saved me hours of research and worry!

If you're planning to call the IRS to verify how this should be handled, good luck getting through! I tried for weeks last tax season with a similar question about bank bonuses. Finally used https://claimyr.com and got through to an IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that the temporary funds transfer wouldn't be an issue as long as the 1099-INT was properly reported by your dad. They also mentioned that keeping documentation of the initial transfer and the return transfer is important, just to show the intent if ever questioned.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself since I had a question about a similar family banking situation that I couldn't get answered. It actually worked! I got through to an IRS agent in about 20 minutes when I had previously spent over 2 hours on hold before giving up. The agent confirmed that temporary transfers between family members for bank bonuses aren't an issue as long as the person receiving the 1099-INT reports it properly. They also suggested keeping simple documentation showing the temporary nature of the arrangement. Definitely worth it for the peace of mind of having an official answer.

Just a heads up - some banks have language in their terms that the account needs to be funded with "new money" and they can trace if it comes from another account at their bank. If your dad's new account is at the same bank where you have an account, they might deny the bonus. And while the $300 isn't a huge tax hit, just remember your dad will pay taxes based on his marginal rate. If he's retired with low income, might not be much. If he's still working and in a higher bracket, it might be worth factoring that into how you split the bonus.

Has anyone considered the $20k might trigger some kind of reporting? I thought banks had to report large deposits?

I did something very similar with my brother last year for a Chase bonus. The key thing is to make sure your dad understands he'll need to report the $300 as income on his tax return - the bank will send him a 1099-INT form. One thing I learned is to keep good records of the initial transfer and the payback. I took screenshots of both transactions and kept them with my tax documents, just in case there were ever any questions. The IRS sees lots of these temporary family arrangements for bank bonuses, so as long as everything is reported properly, you should be fine. Also, make sure to read the bank's terms carefully. Some specify the money needs to stay in the account for a certain period after the bonus posts before you can withdraw it without penalty.