Personal Finance & Money Asked by NewBee on December 7, 2020
I am in the US on F1 visa – OPT, I need to send money to pay off my student loan in India. I have already sent about $25000 to my dad, who has paid it to the bank for my student loan and I am planning to send about $15000 more for the same purpose.
I think my dad does not owe any taxes, because in India there are no gift taxes, but I just read somewhere that in US I have to pay gift taxes for amount above $15000. I am a non-resident alien for tax purposes but that might change in October when my status will change to H1B. I am really confused here and I am not sure what to do. I want to pay off my student debt ASAP, but I also do not want to end up paying huge taxes here in US on my already taxed income.
I also read about something called a lifetime exemption on IRS gift tax, but I am not sure how does that work.
Looking forward to some suggestions.
What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.
If you send $40,000 to your dad, and your dad pays down your student loans by $40,000, then your dad has provided value to you equal to the transfer, so it is not a gift to your dad. You are simply sending the money to your dad for him to use on your behalf. If a store hands $10,000 over to an armored car driver to take to the bank, is this a "gift"? No, the driver is simply acting as an agent of the store, just as your dad is acting as your agent. Your dad isn't the ultimate recipient, just a courier.
This also isn't a gift to the bank you owe the loan to, as $40,000 in debt is being discharged, which is consideration in return for the money.
Answered by Acccumulation on December 7, 2020
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