gift is taxable but is “loan” or “debt” taxable?
(a) you give away your money - gift tax The person who receives the gift doesn't owe any tax.  If you give it out in small amounts, there will be no gift tax. It could have tax and Estate issues for you depending on the size of the gift, the timing, and how much you give away in total.  Of course if you give it away to a charity you could deduct the gift. (b) you loan someone some money - tax free?? It there is a loan, and and you collect interest; you will have to declare that interest as income. The IRS will expect that you charge a reasonable rate, otherwise the interest could be considered a gift. Not sure what a reasonable rate is with savings account earning 0.1% per year. (c) you pay back the debt you owe - tax free ?? tax deductible ?? The borrower can't deduct the interest they pay, unless it is a mortgage on the main home, or a business loan. I will admit that there may be a few other narrow categories of loans that would make it deductible for the borrower. If the loan/gift is for the down payment on a house, the lender for the rest of the mortgage will want to make sure that the gift/loan nature is correctly documented. The need to fully understand the obligations of the homeowner. If it is a loan between family members the IRS may want to see the paperwork surrounding a loan, to make sure it isn't really a gift. They don't look kindly on loans that are never paid back and no interest collected. If you are looking to transfer money to another person in the US, you can do do with no tax consequence.  The current annual gift limit is $14k per year per person, so for example, my wife and I can gift $56k to another couple with no tax and no forms. For larger amounts, there is a lifetime exclusion that taps into your $5M+ estate tax. It requires submitting a form 709, but just paperwork, no tax would be due. This is the simplest way to gift a large sum and not have any convoluted tracking or structured loan with annual forgiveness. One form and done. (If the sum is well over $5M you should consider a professional to guide you, not a Q&A board) The difference is whether or not you have a contract that stipulates the payment plan, interest, and late payment penalties. If you have one then the IRS treats the transaction as a load/loan servicing. If not the IRS sees the money transfer as a gift.
Transfer of Money from you to Your Mother is Tax Free. i.e. This will not be considered as income for your mother as there is NO work done. This would be considered as Gift and would fall under Gift Tax. As per Gift Tax you can give unlimited amounts to close relative. Mother is considered as close relative. The tax rule is same whichever option you follow. You would need to maintain proper paperwork, should there be any query from Income Tax department. Any interest / income your mother generates on this will be her taxable income. You have also mentioned that you are repaying some loan for your relative, again the paper work should be very clear when your mother is transfering the money to your relative. The interest you pay back maybe taxable to your relative depending on paperwork. Edit: Elobrate OP's edit to question From your point of view, once you have given the funds to your Mother and call it gift; it ends. What your mother does with the money invests, spends, etc is not your liability. However if your mother is tranferring money to person's who are not defined as relatives under Gift Law or the interest your relatives get are all taxable events to them. Would I be taxed at my personal income tax rate upon withdrawal of the   funds for this loan from my professionally managed, balanced 401k (not   Roth funds)? Yes. This is a regular distribution. Why wouldn't you be taxed? What's gifting has to do with anything? If taxable, this would move me to the next higher tax bracket. Depending on your other income - it may, or may not. Whether or not taxable when pulling funds out of the investment   account, when I'm repaid, do I owe Federal tax only on the interest   income portion of repayment funds or on the lump sum & interest   received (all of which which would return to my retirement account in   lump)? Only interest. And you will not return it to your retirement account. Not in a lump and not in installments and not in any other way. "I'm not an attorney or a tax advisor. The following is NOT to be considered advice, just general information. In the US, ""putting your name on the deed"" would mean making you a co-owner. Absent any other legal agreement between you (e.g. a contract stating each of you owns 50% of the house), both of you would then be considered to own 100% of the house, jointly and severally: In addition, the IRS would almost certainly interpret the creation of your ownership interest as a gift from your partner to you, making them liable for gift tax. The gift tax could be postponed by filing a gift tax return, which would reduce partner's lifetime combined gift/estate tax exemption. And if you sought to get rid of your ownership interest by giving it to your partner, it would again be a taxable gift, with the tax (or loss of estate tax exemption) accruing to you. However, it is likely that this is all moot because of the mortgage on the house. Any change to the deed would have to be approved by the mortgage holder and (if so approved) executed by a title company/registered closing agent or similar (depending on the laws of your state). In my similar case, the mortgage holder refused to add or remove any names from the deed unless I refinanced (at a higher rate, naturally) making the new partners jointly liable for the mortgage. We also had to pay an additional title fee to change the deed." To my knowledge, there shouldn't be a limit on the amount you can receive as a gift, and gifts are not considered income to you; they are not taxable for the recipient.  Depending on the size of the wire transfer, it may be reported by the bank to the government, but there is no limit, and it should not be a concern to you.  (I don't think that $2500 is large enough to be reportable anyway.) Having said that, this might be a good question to ask your international student advisor at your school to make sure he or she agrees. There is a very similar question on Avvo.com (a legal question-and-answer site) that agrees: Limit to transfer money to students on f1 visa. "To echo part of stannius' response. If it's taxable, there would be tax on $19,999, just a bit less than on $20,000. Your uncle may have a credential, and members here may not, but still he may be mistaken. Or he could be giving you advice on how to skirt the law.  The taxability and the $20,000 threshold are unrelated! Trying to 'avoid' the   $20,000 is a completely misplaced effort. Gifts from anyone are not taxable to the recipient. So long as nothing is received in return, it's not taxable income to her. In contrast a blogger with a ""tip jar"" is soliciting money in exchange for advice, entertainment, etc. that's taxable. Donations to individuals, in the circumstance you describe are not income to her, nor are they deductible to the donor.  Edit - a fellow blogger (more than that, she's my tax crush) had an article Cancer survivor gets $19,000 tax bill for GoFundMe donations which may render my answer incorrect. Other article on this story suggest that the IRS is notified, but the nature of the transfer needs to be addressed.  In my opinion, you should find a new uncle CPA." "Donate buttons are meaningless with regards to taxes. This is payment for something you provided, and you cannot claim that you've received a gift. Any money you receive in this way is payment for your software. Remember, for gifts - no consideration should have been provided to the donor. Anything for which a consideration was provided - cannot be a gift. In your case the consideration is the software, and it's value is the amount you were paid. Since every person can decide how much to pay you on his own - any payment is for the software, not a gift. Any money you get is taxable to you, and you cannot claim it as ""gifts"" without exposing yourself to risks of making fraudulent claims. Consult a licensed tax adviser (EA/CPA licensed in your State) for a qualified tax advice." This is possible.  In fact in the cases of debt settlement the collection companies typically issue a 1099 for the difference on what is owed and what is settled, making that taxable income.  So the IRS sees it as income (in the US). However, this kind of dishonesty is not conducive to building long term wealth or wealth of significant means.    As others have said this is fraud, but provided that one is truthful on the loan application, it would be impossible to prove.  How can one prove that a person has no intention of paying a loan back? Doing this once or twice may ruin your ability to receive a loan for legitimate purposes for life. "Yes, it's taxable. If anyone suggests it's a gift, they are mistaken. There's a line on the 1040 for ""other"" and as long as you claim it, you're fine with the IRS. It's 2012 income as you already got it.  Edit - mhoran makes two good points I'm not really able to address. (a) does a late bonus such as this effect one's penalty? (b) since it skipped payroll, will there be an issue by not having FICA withheld?"