How can my father pay off my car loan without my incurring any tax liability?
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How can my father pay off my car loan without my incurring any tax liability?
My father is willing to pay off my car loan. It is in the amount of $28,000. How do I go about not getting taxed and yet pay off the car? I don’t want him to make it look like a loan cause then he will hold my new car’s title.
Asked on November 30, 2010 under Bankruptcy Law, New Jersey
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 14 years ago | Contributor
Go and see an accountant as soon as you can to see if this can be done in a different manner. You can give a child I believe $13,000 tax free every year as a parent. Since we are at the end of 2010 your Father could give you $13,000 now then the first of the year another $13,000 which you could use to pay off $26,000 of the $28,000 loan. Then you would have $2,000 left to pay off yourself. Sounds reasonable to me but I would check and see if it can be done. This is really an accounting question and not necessarily a legal one. Good luck.
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