Lending money (tax implications)

[rigz]

If I lend my friend 8k and he pays me back within 3-4 months:

A) is there any tax implications for either side?

B) do I need to charge him interest? It's a loan but I don't mind if I only get back the 8k

[disneysteve]

Since the loan amount doesn't exceed the gift tax limit, I believe you aren't obligated to charge interest. Double check with your tax professional though.

There won't be any tax implications to either of you either.

You really asked the wrong questions though. Your one and only question should have been: Should I lend $8,000 to my friend? The answer to that is almost certainly a resounding NO WAY IN HELL!

See a previous thread:http://www.savingadvice.com/forums/g...my-sister.html

You say that you'd be okay just getting back the 8K. Will you also be okay getting back ZERO? Will you be okay when your friend is late with a payment but spends a couple hundred dollars to go to a concert? How about when he spends a couple thousand to take a vacation while he still owes you a bunch of money? Will you be okay never speaking to this person again?

If you can truly afford it (and I'd want to see you post your full financial picture) and really want to do so, gift him the money. If he chooses to pay you back at some point, great, but make it entirely clear that no repayment is required. Somehow, I'm guessing that you can't actually afford to give away 8K but I'm willing to be proven wrong if you want to show us the numbers.

Don't lend him money. It won't go well.

[thesimplemoneyblog]

Generally speaking, I agree with disneysteve. If you lend to friends or family, think of it more like a gift as most family and friend loans often do not get paid back in full.

If you are okay never seeing all or most of the $8k and want to help out, then proceed at your own risk. Otherwise, if you feel you expect to be paid back timely and in full, it's probably best for the relationship to not loan the money.