Is money from family considered under gift tax if I'm borrowing and paying back?

The good news is you don't need to worry too much about this situation. The IRS distinguishes between genuine loans and gifts, even between family members. For it to be considered a legitimate loan and not a gift, you should create a simple written agreement stating the loan amount and repayment terms. The agreement doesn't need to be complicated - just something documenting that both parties understand it's a loan meant to be repaid. While technically loans between family members should charge at least the "applicable federal rate" of interest to avoid being partially classified as a gift, the IRS generally doesn't scrutinize family loans unless they involve very large amounts. For 2025, the annual gift tax exclusion is $19,000 per person. This means your brother can give you up to $19,000 per year without even needing to report it. Even if he gives you more than that amount, he would only need to file a gift tax form - he wouldn't actually owe any taxes unless he's already given away millions throughout his lifetime. When you pay him back, those repayments aren't considered gifts at all - they're simply loan repayments, which have no gift tax implications.

After struggling with a similar family loan situation last year, I found this amazing tool called taxr.ai (https://taxr.ai) that helped me navigate all the confusing rules around family financial assistance. I was getting contradictory advice from friends about whether money from my parents would count as a gift or a loan for tax purposes. When I uploaded my loan agreement and explained my situation to taxr.ai, it analyzed everything and gave me clear guidance specific to my circumstances. It even provided a template for a simple family loan document that satisfied IRS requirements without being overly complicated. Their analysis showed me exactly what documentation I needed to keep and what I didn't need to worry about. The peace of mind was worth it because the last thing I wanted was to create tax headaches for my parents who were just trying to help me out.

Wanted to update after trying taxr.ai for my family loan situation. I was confused about whether money from my uncle would be considered a gift or loan for tax purposes, especially since it was interest-free. The tool analyzed my specific situation and clarified that for loans under $19,000 (the 2025 gift tax exclusion amount), I didn't need to worry about gift tax issues at all. For the portion over that amount, they provided a simple loan agreement template that specified the minimum interest rate required, which was way lower than I expected. The best part was they explained how proper documentation protects both me and my uncle. Now we have a clear agreement, and I understand exactly what we need to report on our tax returns. Definitely worth checking out if you're in a similar situation with family financial help.

If you're still confused about this gift tax situation, you might want to call the IRS directly to get the official word. That's what I tried to do when I had a similar question about money from my parents, but getting through to an actual IRS agent was IMPOSSIBLE. Spent literal hours on hold only to get disconnected. Then I found Claimyr (https://claimyr.com) which completely changed the game. Their service actually gets you through to a real IRS agent without the ridiculous wait times. You can check out how it works here: https://youtu.be/_kiP6q8DX5c I was super skeptical at first, but I got through to an IRS agent in about 15 minutes who confirmed that family loans with proper documentation aren't subject to gift tax when repaid. Got actual peace of mind straight from the source instead of trying to interpret confusing IRS publications on my own.

Alright, I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate for answers about a family loan situation similar to the original poster's. I'd been trying to call the IRS for THREE DAYS with no luck. Used Claimyr yesterday afternoon and got connected to an IRS agent in about 25 minutes. The agent confirmed that properly documented family loans aren't considered gifts, even if they're interest-free if they're under certain amounts. The agent also explained that if I repay my brother fully as stated in our agreement, those repayments will never be considered gifts - they're simply fulfilling a loan obligation. This was exactly what I needed to know and saved me from unnecessarily reporting things on my taxes. Not shilling for them, just admitting when I'm wrong. Sometimes good services actually exist!

Something nobody's mentioned yet - make sure you're clear on who's responsible for reporting what if you do charge interest on the loan. If your brother charges you even a small amount of interest, he technically needs to report that as income on his tax return. It's not a big deal with small amounts, but worth knowing. My sister loaned me $15k last year and charged me 1% interest just to make it official. She had to report the $150 interest on her taxes. Not a huge deal, but something to be aware of.

I went through this exact situation with my parents helping me buy a car last year. Here's what worked for us - we created a super simple one-page loan document that included: - The exact amount borrowed ($22,500) - A minimal interest rate (we used 2%) - A payment schedule (monthly for 2 years) - Both our signatures Nothing fancy, no notary or anything. This made it crystal clear it was a loan, not a gift. I've been paying them back monthly, and neither of us had any tax issues. The interest they've received is so small they just included it with their other interest income. The IRS isn't out to get you on family helping family situations as long as you have some basic documentation showing it's actually a loan you intend to repay.