Paid off someone else's Loan

[whatdoiknow]

Is there any way to deduct the payment someone made to pay off another person's loan?

[David1980]

Depending on the amount paid off, you might have to file a gift tax return. Do it often enough and you'll pay gift tax for doing it.

Would the loan be deductible for the other person had they paid it?

[jimmcg]

Is there any way to deduct the payment someone made to pay off another person's loan?

Depends on reason they made the payment. If legally obligated to do so (as in cosigner liability) then the answer is yes. If simply did so as a gift without consideration and no legal obligation to do so then the answer is no. (and gift tax regs apply)

[David1980]

If legally obligated to do so (as in cosigner liability) then the answer is yes.

So if I cosigned on a car loan for a friend and then paid off their car loan I can deduct it? (I know that's not what you meant, just pointing out that this might not even be a loan for something that would be deductible.)

[spanel]

and usually you cant deduct a loan anyway.. usually only what you pay with the money you got from the loan.


Chris

[whatdoiknow]

Father paid off a school loan (but not all) for a son, but not obligated to. Son had no means even to make monthly payments, and aged Grandpop was co-signor, so Father didn't want the GPop to be on the hook.

[taxea]

Depends on reason they made the payment. If legally obligated to do so (as in cosigner liability) then the answer is yes. If simply did so as a gift without consideration and no legal obligation to do so then the answer is no. (and gift tax regs apply)

wait a minute, just because he may be legally obligated like a co-signer doesn't make it deductible. It depends on what the loan was for.