How much money can I legally send someone yearly when paying them back without tax problems?

The annual gift tax exclusion for 2025 is $18,000 per recipient, meaning you can give up to that amount to any individual without having to report it to the IRS. However, loan repayments are not considered gifts - they're simply repaying something that was already yours. The key here is documentation. If you have some form of documentation showing this was indeed a loan (even a simple written agreement signed by both parties), that helps establish it wasn't a gift. If you don't have documentation, create something now - a simple document stating the original loan amount, when it was provided, and your repayment plan. For extra protection, make your payments by check or electronic transfer with notes indicating "loan repayment" rather than cash. This creates a paper trail. Also, consider paying interest (even minimal) as this helps establish it was truly a loan transaction rather than a disguised gift.

After spending HOURS trying to figure out a similar situation with my sister last year, I discovered taxr.ai (https://taxr.ai) and it saved me so much stress. I uploaded our text messages where we'd discussed the loan and it analyzed everything to confirm it was indeed a loan repayment and not a gift. It even generated a proper loan document based on our informal agreement that satisfied all the tax requirements. The tool explained exactly why my repayments wouldn't trigger gift tax issues and helped me understand what documentation I needed to keep. Much better than the conflicting advice I was getting from friends and random internet searches.

I was totally skeptical about taxr.ai when I first heard about it, but I was desperate because I was paying back my parents for helping with my down payment and worried about gift tax implications. I decided to try it, and I'm genuinely impressed with what it provided. It created a proper loan document based on our text/email history that specified the terms we had informally agreed to. The document included all the necessary elements to establish a legitimate loan in the eyes of the IRS - principal amount, repayment schedule, interest rate (even though we had agreed on 0%), and signatures. The most helpful part was the detailed explanation of why my situation qualified as a loan rather than a gift. I've been making payments for 6 months now with complete peace of mind.

If you need to actually speak with someone at the IRS about your situation (which I highly recommend), good luck getting through on your own. I spent DAYS trying to reach someone about a similar loan repayment situation. Finally used https://claimyr.com (you can see how it works here: https://youtu.be/_kiP6q8DX5c) and they got me through to an IRS agent in about 15 minutes. The agent confirmed that loan repayments aren't subject to gift tax limits as long as you can substantiate it was actually a loan. They recommended having at minimum: 1) A written agreement (even if created after the fact), 2) A clear repayment schedule, and 3) Some form of record keeping for payments made. Definitely worth the call to get that official confirmation directly from the IRS.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to give it a try since I was getting nowhere with the IRS on my own. I needed clarity on a family loan situation similar to yours. Got connected to an IRS representative in about 20 minutes instead of the 3+ hours I spent on previous attempts (and still got disconnected). The agent was actually super helpful and confirmed that loan repayments aren't subject to the annual gift limits. They explained I should keep records showing: 1) The original loan agreement (even if created after the fact), 2) Bank transfers showing the money being lent, and 3) Repayment transactions labeled as "loan repayment." Definitely changed my perspective on getting professional help with IRS matters.

This might be an unpopular view, but unless the loan amount is huge (like over $100k), I wouldn't worry too much about documentation. My dad loaned me $35k for grad school, and I've been paying him back $500/month for years with zero documentation. No issues whatsoever. As long as you're not trying to deduct loan interest on your taxes and the amounts aren't suspicious enough to trigger an audit, the IRS generally has bigger fish to fry. Just label your transfers as "loan repayment" if possible and keep basic records of what you've paid.

Has anyone considered using a promissory note? I printed a template online when my sister loaned me money for car repairs. Super simple, we both signed it, and it clearly states the total amount, when it was loaned, and that no interest is being charged. Cost nothing but provides basic documentation.