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No, sorry. Under current tax law, employees are not allowed to deduct any business expenses. In 2017 and before you could, but it was subject to some limits.

Are you taxed as an S-corporation or a sole proprietorship?

The mileage reimbursement just wouldn't count as taxable income. She could deduct the mileage expenses if she counted the reimbursement as income, but they would cancel each other out and the result would be the same.

They should not send her a 1099 for the mileage reimbursement; they should know this is non-taxable income. If they do, it would probably be wise to list it on a Schedule C and also list the corresponding deduction.

Edit: I read more carefully and see the mileage reimbursement was included in the 1099-NEC. In that case, yes, she should add a corresponding deduction on Schedule C so it's not counted as taxable income.

If it were 1099 income, I would say have them mail the check to you the last week of December, you get the check and cash it in January. The income only counts when you get "constructive receipt"; it would be very difficult for anyone to prove the date the check actually came in the mail and it would be taxed in the year it hits your account. As a W-2 employee though, I'm not sure this would work so well. They would want to include the income on your 2023 W-2 form, which would defeat the purpose of any deferred payment. I doubt they would issue this lump sum on a 1099-NEC, as it might run afoul of labor laws, although it's not uncommon for employees to later be rehired as independent contractor consultants. Could be worth an ask?...

Wow - thanks for all the responses. I think I'm getting closer! Check out the table on Page 34 of IRS Pub 560 . I believe it has the calculation you're looking for. In short, it doesn't technically distinguish between "employee" and "employer" contributions, but it does allow the business owner to make an elective deferral and then additional contributions on top of that, so the math works out to be basically the same. The table on page 34 is titled "deduction worksheet for self-employed" and says as one of the entries: "Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan for the 2022 plan year. Don't enter more than $20,500" So this begs ...

If it were 1099 income, I would say have them mail the check to you the last week of December, you get the check and cash it in January. The income only counts when you get "constructive receipt"; it would be very difficult for anyone to prove the date the check actually came in the mail and it would be taxed in the year it hits your account. As a W-2 employee though, I'm not sure this would work so well. They would want to include the income on your 2023 W-2 form, which would defeat the purpose of any deferred payment. I doubt they would issue this lump sum on a 1099-NEC, as it might run afoul of labor laws, although it's not uncommon for employees to later be rehired as independent contractor consultants. Could be worth an ask? ...

Check out the table on Page 34 of IRS Pub 560. I believe it has the calculation you're looking for. In short, it doesn't technically distinguish between "employee" and "employer" contributions, but it does allow the business owner to make an elective deferral and then additional contributions on top of that, so the math works out to be basically the same.

I would not do what you describe. The obvious problem is that it's not an arms-length transaction. The same "strategy" could be employed with any asset - buy it with the business, sell it to yourself personally for $1, then use it or resell it. A transaction has to have substance to it to be viewed as legitimate by the IRS. Selling a $100,000 Range Rover from a business you control to yourself for $1 does not meet that standard. Even IF the sale were viewed as legitimate, there could still be a few problems with it. First, you only get to deduct the business use percentage of the vehicle, even if using bonus deprecation on a >6000 pound vehicle. If you used the car for 60% business, and you want to take 100% bonus depreciation, yo...

In the best case, you will earn a slightly higher rate of return on your uninvested cash, at the cost of a lot of complexity and a long-term commitment. You should not underestimate the "costs" of adding complexity and long-term commitments to your financial life. Complexity takes time and energy, and requires vigilance. Long-term commitments limit your options when your financial situation changes, as it inevitably will. The compensation you get from IBC in exchange for this complexity and commitment is too small to make it worth it. There are other ways to achieve the same modest, additional return, including picking up an extra shift at work every once in a while, grabbing a couple credit card sign-up bonuses or brokerage trans...

Third, if you get laid off and need the contributions for your living expenses, they won't be available without penalty until you're at least 59.5, or in some situations, 55. If you are laid off before the year you reach age 55, I don't believe the age 55 rule would apply and you would have to wait until age 59.5. If you have enough other savings to bridge the gap, this would not be a problem. The after-tax contributions (not gains) can be accessed at any time without penalty, correct? If it's still in the 401k the plan documents might limit how the distribution can happen (require full distribution, for example) but if it's been rolled into a Roth IRA the contributions are accessible. Yes you’re right. If the mega Backdoor roth is rolled ...

Check into Schedule E instead of Schedule C. I'm not sure exactly where the line is between business income and royalties, but Schedule E explicitly says it's for royalties. One advantage of Schedule E (probably, unless you're in the 90% Social Security bracket) is that you don't have to pay self-employment tax on Schedule E income, whereas you do on Schedule C.

As of tomorrow, I will have front-loaded $73,500 into retirement plans for 2023: $22,500 Pre-Tax (401K Contribution) $7,500 Pre-Tax (Old People 401K Catchup Contribution) $11,250 Employer Match (401K Contribution) $32,250 Post-Tax (Contributed to 401K and then "Megabackdoor" rolled to a Roth IRA) On my paystub, I have ~$85K in gross earnings for 2023, with only a few thousand making it to my bank account: everything else has been withheld or put into my 401K. If I get laid off tomorrow and don't have any more W2 income in 2023, will I be guilty of overcontributing to my retirement accounts for 2023? I don't think so. The elective deferral ($20,500) and catch-up ($7,500) certainly have no overall income requirement against them. A...

I had a bit of a non-traditional college experience, with a big commitment to an extracurricular study/research project. I had a little time to party and be a college kid, but not much. No time for a job, even part-time. My parents provided partial financial support, maybe in the 1/2 to 2/3 range, and I covered the rest with loans and income from working over the summer. Looking back, I don't think the amount of parental financial support had much effect on my level of effort. There are probably kids where having some "skin in the game" will affect their work ethic, but I think most will probably apply whatever work ethic they've developed to that point regardless of amount of loans. Loans feel like free money at that age and life...

The answer is you need to do this. You get to deduct the full PTE amount on your business income which is how you get the benefit of this. This was the answer to the SALT limit for those who own businesses. Not so fast. As in most things, the devil's in the details. For example, in California, the PTE elective tax credit offsets regular tax but not AMT, so for taxpayers whose tax bill is determined by AMT, or whose gap between the regular tax and AMT is smaller than the available credit, won't be able to use some or all of the credit. Likewise, it's important to understand how the credit is calculated, how much you'll be able to use, and what happens to unused credit (eg. carried forward for a certain number of years). Although uncommon, i...

Here is a nice summary from the WCI. Not terribly straightforward. https://www.whitecoatinvestor.com/pass-through-income-deduction/ I don't think this is the same thing. That link is about the pass-thru income deduction at the federal level - ie. the section 199a or QBI deduction. I believe OP is asking about a pass-thru entity elective tax, which is an option some states have set up that allow owners of some pass-thru entities (eg. S-corporations) to pay personal income tax through the business, so that the tax is deductible at the business level and not capped by the $10,000 SALT cap on Schedule A. https://www2.deloitte.com/us/en/pages/tax/articles/new-jersey-establishes-elective-entity-tax-for-pass-through-entities.html I have no idea h...

My spouse and I got married at a European destination owned by her family. Let's say the location was extremely lavish and world-renowned (personally, they are comfortable but not extremely wealthy). There was an Indian wedding there shortly before ours where the cost was rumored to be in the tens of millions of dollars. Elephants were flown in. We were very lucky to be able to use it essentially at-cost. Our family and friends were scattered across the country, and some in Europe, so most guests would need to travel anyway, and it seemed insane to forego the opportunity to use the location. We had about 100 guests total. We scheduled a week-long festivity and nearly rented out a small hotel. There were scheduled activities each day - hikes...

This is not what you asked for but it may be helpful. Below is a table of retirement savings (not necessarily net worth, which can include other things like home equity, emergency funds, savings for other goals, personal property, etc.) versus age for someone who earns a flat inflation-adjusted $250,000 gross income from age 21 to 66, saves 15% of gross income (so, $37,500), and earns at steady 4% real rate of return: Age Retirement Savings Savings/Income Ratio Portfolio income @ 4% 21 $0 0 $0 26 $203k 0.81 $8k 31 $450k 1.80 $18k 36 $751k 3.00 $30k 41 $1,117k 4.47 $45k 46 $1,562k 6.25 $62k 51 $2,103k 8.41 $84k 56 $2,762k 11.05 $110k 61 $3,563k 14.25 $142k 66 $4,539k 18.15 $182k The $182k is about 73% of your gross income, and 85% of gross i...

Here is a nice summary from the WCI. Not terribly straightforward. https://www.whitecoatinvestor.com/pass-through-income-deduction/ I don't think this is the same thing. That link is about the pass-thru income deduction at the federal level - ie. the section 199a or QBI deduction. I believe OP is asking about a pass-thru entity elective tax, which is an option some states have set up that allow owners of some pass-thru entities (eg. S-corporations) to pay personal income tax through the business, so that the tax is deductible at the business level and not capped by the $10,000 SALT cap on Schedule A. https://www2.deloitte.com/us/en/pages/tax/articles/new-jersey-establishes-elective-entity-tax-for-pass-through-entities.html I have no idea h...

If I were in your shoes I’d prepare a pro forma budget for life in the new house, and see what percentage of other assets you’d need to draw to support your planned lifestyle. If ~3.5% or less, then I’d say you can afford the house. If not, then no. Whether you CAN afford the house is not the same question as whether you SHOULD. The opportunity cost for a $5M house, plus all the associated expenses, is extremely high. That will pay for a lot of European vacations, boats, engine rebuilds, etc etc. If the $5M house would bring you more happiness than any other way to spend the money, great. That is another dilemma in a nutshell. Everyone would like both right? I would rather have the experiences over the house, if that makes sense. Can I do ...

If I were in your shoes I’d prepare a pro forma budget for life in the new house, and see what percentage of other assets you’d need to draw to support your planned lifestyle. If ~3.5% or less, then I’d say you can afford the house. If not, then no.

Whether you CAN afford the house is not the same question as whether you SHOULD. The opportunity cost for a $5M house, plus all the associated expenses, is extremely high. That will pay for a lot of European vacations, boats, engine rebuilds, etc etc. If the $5M house would bring you more happiness than any other way to spend the money, great.

I think it's okay to include it in planning, as long as you account for the fact there's a chance you might get nothing. Let me use an example. Let's say you're moving to a HCOL area and looking to buy a house. You have an elderly parent with some health issues, not on hospice or anything, but you expect to live another ~5-10 years roughly. This parent has significant assets and you're listed as the beneficiary, and let's say there's no dynamics at play where you could foresee being removed as a beneficiary (for example, parent just remarried). In my opinion, it would be okay to take into account the likely inheritance by buying a little more house than you might otherwise. But, I wouldn't buy a house so expensive I couldn't afford it witho...

My guideline for home affordability is to make a realistic pro forma budget, and see if you have at least 5-10% gross income as a buffer. If your income or expenses are unusually variable, maybe more buffer could be warranted. This budget should include all housing costs (PITI, utilities, realistic budgets for repairs and upgrades), taxes, savings for retirement and other goals (eg. education), and realistic spending in other categories. Spending should be based on actual spending history as opposed to optimistic projections (ie. if your family spends $10,000/year at restaurants, don't assume you will magically spend $3,000 once you buy the house), but should include planned changes in expense like kids entering or leaving daycare. Ideally,...

With the SALT cap (including state income tax, property tax, sales tax, etc.) at $10,000 and the standard deduction starting at $13,850/$27,700, taxpayers will need significant amounts of home mortgage interest, charitable donations, and large medical expenses for itemizing to be worth it. For those taxpayers who take the standard deduction (most), these expenses are effectively non-deductible. I used to pick out the portion of my car registration that was a tax on the vehicle but now I don't bother, it's subsumed under the SALT limit, which I greatly exceed with a combination of property tax and state income tax.

Standard Bogleheads advice is to contribute Roth at a total marginal tax rate of 12% or less, except if you’re very confident you will be able to soon withdraw at a lower rate. The reason being, 12% is a historically low rate, and there’s lots of things that can happen that will raise a person’s tax rate- unexpected income, inheritance, tax law changes, moves to a different state, etc. And, even if you’re wrong, the impact impact of the error will be limited to 12% (on the assumption it won’t ever be possible to withdraw at less than 0% ie. subsidized withdrawals). But, there’s no theoretical upper limit to a future marginal could be if all those future impacts occur. I’d defer down to the top of the 12% bracket and contribute as much Roth ...

White coat investor recently set up a 401k for his business and wrote about it in the blog. It has every feature a person could want- MBR, loans, etc. I can’t remember the cost but it was not extremely expensive. I’d go search the blog for info.

I think your analysis is close to right. Maybe the cost of capital should be $750/year instead of $1,000 because the value of the car depreciates, so has an average value of $15,000 over the period in question rather than $20,000. But yeah, a good lease deal on a car that's expected to have low depreciation can be pretty cheap. As you point out, those lease deals are unusually good. Are they zero down? I've seen lots of lease ads that draw people in with a low monthly payment and the fine print says $5,000 down or something. As someone else pointed out, they are short-term (18 or 24 month) leases. Others may like turning over cars that quickly and finding "hacking" deals. I like finding a car I like and keeping it for longer term....

talacker wrote: ↑Thu Mar 02, 2023 3:00 pm

fyre4ce wrote: ↑Thu Mar 02, 2023 2:50 pm

WhiteMaxima wrote: ↑Thu Mar 02, 2023 2:39 pm If you total asset can buy you 25,000 oz of gold (assuming 1971 gold price $40/oz).

Why would you use 1971 gold prices? This makes equal sense to valuing your shares of General Electric stock at 1971 prices instead of current prices, which is to say, none at all. Net worth means your current net worth, unless you’re explicitly talking about it at some other time.

I think it was a roundabout way to say that the term millionaire has never been indexed to inflation.

Fair point that purchasing power is really what matters. It's much better to be a millionaire in 1971 than 2023. But, the definition of a millionaire is still the same, it's just the significance of that milestone that gets eroded by inflation.

toddthebod wrote: ↑Thu Mar 02, 2023 2:49 pm My net worth fluctuates, and it goes up and down with the markets and with attitudes and with feelings, even my own feelings. Yes, even my own feelings, as to where the world is, where the world is going, and that can change rapidly from day to day. l would say it's my general attitude at the time that the question may be asked. And as I say, it varies.

This is so brilliant, you should lead the free world.

WhiteMaxima wrote: ↑Thu Mar 02, 2023 2:39 pm If you total asset can buy you 25,000 oz of gold (assuming 1971 gold price $40/oz).

Why would you use 1971 gold prices? This makes equal sense to valuing your shares of General Electric stock at 1971 prices instead of current prices, which is to say, none at all. Net worth means your current net worth, unless you’re explicitly talking about it at some other time.

It would be accurate to say assets - liabilities > $1MM A perhaps more pertinent question is, what is an asset and what is a liability? Fair question. There are some edge cases but I think they can be worked out. Is a valuable skill or talent that has the ability to generate income an asset? No. A skill, talent, degree, etc requires work to convert into a financial asset. These assets are also lost at death and can be lost other ways. There’s no generally accepted definition of net worth which includes potential future earnings that I’m aware of. Is a commitment or obligation for a future expense a liability? Yes if legally binding. No if not. Is my kids 529 an asset? I own it and it is valuable. Is my commitment to pay for my kids educati...

How did you determine you were a millionaire? I once read about an individual who was so desperate to reach that goal, he weighed the gold filings in his teeth and calculated their worth and added that number to his portfolio. Never got that involved in meeting a goal. YMMV How did he "weigh" the fillings? Did he remove them from his mouth? Or just estimate their weight? I know this example sounds excessive, and it probably is, but I'm actually on-board with including all assets a person owns, as long as the value is not negligible and is actually recoverable in some way. My concern with including fillings is, how will that value ever be recovered? Does he plan on having the fillings replaced with modern composite fillings? Is th...

Another +1 for Dave Ramsey! I found the Total Money Makeover to be very encouraging and it's the only book that I've reread multiple times. The snowball method (pay off smallest to largest debt, regardless of APR) will help you pay off the debt but the bigger portion is reading the words to help get your life back on its financial rails. The only 2 parts you have control over in the debt payoff is income and expenses so do everything that you can to increase your income and lower your expenses. I haven't been on the MMM forum in awhile but if you need ideas to live frugally, that's the place to go. Dave Ramsey is a fake guru, a charlatan and a fraud. Same goes for Suze Orman, Graham Stephan, and Napoleon Hill, among others. They are nobodi...

FYI the correct name is "Roth", not "ROTH". It's not an acronym, but rather a proper name, Senator William Roth.

Roth is best thought of as a "tax structure" - contributions are after-tax (not deductible), and all future growth and withdrawals are tax-free. Accounts also get a 10-year stretch for heirs. Many different kinds of accounts can be Roth: IRA, 401k, 403b, 457b, possibly others.

Is there anything you can do for work between now and early April? Drive Uber, mow lawns, wash dishes, deliver pizzas, etc etc. Any extra income, even if at a low rate, will help your situation a lot. In addition, a temporary job will give you a sense of control over your situation. The alternative is hanging out in the house all day every day worrying about your situation. Far better to take charge. The job can suck, it’s only for 4 or 5 weeks.

Safe harbor includes timely estimated taxes like quarterly even or frontloaded/decreasing payments. AI form method should not be needed and actually will probably make it worse, since the income is higher in current year and frontloaded. Or paid by withholding, although in OP's case, it's too late for that as they have already taken withdrawn the money. QUESTION: If someone in a case like this (not this exactly) withholds all of the tax they *think* they will need to pay, but they "miss", perhaps by $3k (but anything more than $1k)... Is the tax penalty only on the amount not withheld (the amount "missed"), or does the penalty back up and "too bad, you didn't withhold 100%, so you won't have any benefit from using ...

My understanding is that the safe harbor rules (100% of last years tax or 110% for high earners) only applies to total amounts tax withheld throughout the year, not estimated taxes paid by voucher. If your tax withholding is less than 100% of 110% of last year, but your total taxes paid (withholding plus estimated taxes) is greater than 90% of this years taxes, you might have to fill out the 2100AI form to avoid penalties. I don't believe this is correct. You are allowed to meet the safe harbor by withholding payments and "timely filed" estimated payments combined. Estimated payments count as being "timely filed" if they are evenly spaced throughout the year. So even if you have a big lump of income in February, you can...

FYI, the mileage rate for charity is $0.14/mile, not $0.655/mile as has been stated. The latter is a business mileage rate.

https://www.irs.gov/newsroom/irs-issues ... s-per-mile

Hi All, Looking for thoughts from the brain trust about possible strategies for buying out my in-laws. Background In 2021 In-laws received an offer they couldn't refuse to sell their rental property. They took the offer and wanted to do a 1031-Exchange. Our lease was coming to an end and they proposed they buy a house in a nice area which we would live in and eventually buy from them. They ending buying a house for $1.4m, of which about $455k is a mortgage at 3.625%. It was a little unclear at the beginning what the arrangement would be, but it turned out to essentially be a triple-net lease in which we pay for everything. So our monthly "rent"—about $4k—covers the mortgage payment, property insurance, house insurance, HOA, etc. ...

In my opinion, all the different kinds of retirement account types need to be consolidated (401k, 403b, 457, etc etc). The different accounts, and complex rules for each, are as a result of successive legislation. Politicians frequently boast about wanting to "simplify" the tax code, usually meaning reducing the number of brackets so their wealthy donors will pay a lower rate. But simplifying retirement accounts down to two (individual, employer) or possibly even one, with much simpler rules, would be real simplification that would make things easier on taxpayers and the government.

Glad to hear the penalty was abated!

So let me make sure I understand this correctly. My employer does offer a Roth 401k option and I do have a Roth IRA account with Etrade. So if my employer allows rolling from Roth 401k to Roth IRA, it would make sense to contribute an additional $31k? Because the distribution from a Roth IRA is non-taxable vs taxable from a Roth 401k? I'd better get on a call with Empower now! There's still some confusion here I will try to settle. The Roth 401k option is for elective deferrals , ie. the $22,500/year employee contribution. If your employer allows you to roll money out of the Roth 401k into a Roth IRA, this may or may not be desirable. It could make sense if the 401k had high fees or bad investment options. But either way, this would be a d...

I think you misunderstand what the $66,000 limit is. That's the limit of money that can go into any given 401k per person per year, totaled from the employee and the employer. So, if you contribute your full $22,500 elective deferral, the employer can put in no more than $43,500 (= $66,000 - $22,500) for you, in the form of match, profit sharing, etc. Except for Solo 401k's where you are both the employee and the employer, most normal W-2 job situations don't get close to this limit. Within the last decade or so, it's become popular for 401k plans to have a feature where the employee can make after-tax contributions. These are made by the employee but not subject to the $22,500 limit. On their own, they're not great, gains are taxed as ordi...

In my example, after 30 years, $10,000 in Roth will be worth $100,627 (= $10,000 x 1.08^30) $12,400 in taxable will be worth $114,787 (= $12,400 x (1 + 8% - 2%*15%)^30) before taxes The basis will be $35,005 (= $12,400 + ($12,400 * 2% * [1 - 15%])/(8% - 2%*15%) * (1 + 8% - 2%*15%)^30)). After capital gains tax, the value will be $99,788 (= $114,787 - [$114,787 - $35,005] * 15%) Now we know you forgot the FICA taxes. FYI. Omitted but not forgotten. Paying more fica tax gives a higher social security benefit when retired. The rate of return is highly variable. It’s excellent in the 90% bracket, though OP probably isn’t. It’s roughly break-even in the 32% bracket, and a net loss in the 15% bracket. If we knew more of OP’s particulars I could ...

To be clear, if it were me, I would not forego deductions and pay a tax cost for more Roth space. A ~30 year payback period is too long for me. But if the OP had clear reasons for wanting to do so (he's a TIPS-head and highly values more tax-protected space, very concerned about asset protection, etc.) it wouldn't be the craziest decision I've ever seen. I dont have much of an empirical basis for wanting to, so thank you for that math, it was very helpful. How I'm going to try to adjust your math for a 2.5% dividend yield and see what the break-even point is. I've always been inclined to want to pay as much tax now as possible to enjoy tax-free income in the future and have to check myself to make sure im not making irrational decisions. A...

Lee_WSP wrote: ↑Thu Feb 23, 2023 5:36 pm That dividend drag is extreme.

If by that you mean the dividend drag adds up to a surprising amount over very long time horizons, I'd agree.

If by that you mean 2% is an unrealistically high number, I would not agree. Yield on VTSAX is 1.53%, and on VTIAX is 2.81%. Bond funds are yielding around 5%, so 2% is probably low for anything other than near-100% US stocks.

To be clear, if it were me, I would not forego deductions and pay a tax cost for more Roth space. A ~30 year payback period is too long for me. But if the OP had clear reasons for wanting to do so (he's a TIPS-head and highly values more tax-protected space, very concerned about asset protection, etc.) it wouldn't be the craziest decision I've ever seen.

Thanks for the valuable input and well wishes, everyone! Far exceeded my expectations which were already high. Everyone seems to be in agreement that I should get umbrella insurance ASAP, so I got a $2m policy through State Farm today. I also just opened a Vanguard Roth/brokerage account. Other consensus suggestions that I'll be pursuing/implementing -PRENUP! When the time comes -Buy a reliable car, no need for it to be too spendy but get something with longevity/safety in mind. In my case I will be getting a truck -Read up on Bogleheads recommended literature, I have written down the names/sources you all have suggested such as JL collins -Everyone is in agreement that I have some time to figure out what to do with this money, obvious I k...

You are probably not going to come out ahead by not taking deductions you're legally entitled to. Let's say you earn $10,000 and have $10,000 in deductions you can legally take. Also let's say your marginal tax rate is 24%. If you don't take the deduction, you pay $2,400 in taxes, so you keep $7,600, and you can contribute that $7,600 plus $2,400 of other money to a Roth account. If you take the deduction, you just get to keep the $10,000 earned, plus the $2,400 you would have otherwise spent on taxes, and invest it in taxable. Making some reasonable assumptions (8% growth, 2% yield, 15% marginal tax rate on qualified dividends) it would be about 30 years until you break even going the Roth route. The Roth money has some advantages in asse...

You are probably not going to come out ahead by not taking deductions you're legally entitled to. Let's say you earn $10,000 and have $10,000 in deductions you can legally take. Also let's say your marginal tax rate is 24%. If you don't take the deduction, you pay $2,400 in taxes, so you keep $7,600, and you can contribute that $7,600 plus $2,400 of other money to a Roth account. If you take the deduction, you just get to keep the $10,000 earned, plus the $2,400 you would have otherwise spent on taxes, and invest it in taxable. Making some reasonable assumptions (8% growth, 2% yield, 15% marginal tax rate on qualified dividends) it would be about 30 years until you break even going the Roth route. The Roth money has some advantages in asset...

I can only see the loan being a benefit over simply gifting the money (as either a lump sum or annual payment under the gift exclusion) if two criteria are met. First, OP would need the large lump sum right now, as opposed to being okay with getting a $17,000 (or multiple thereof) check from dad every year. Second, dad would have to have some significant chance of having estate tax issues. From what we are reading here, neither of those criteria are met, so that's why I am suggesting simply gifting the money in whatever structure dad prefers.

It is possible to structure this as a loan, but I'm not certain that's the best. The substance of the transaction is a really a gift, not a loan, so that's automatically a negative if you ask me. In addition, there's some complexity and probably cost in setting up the loan. And, your dad will have to pay income taxes on the imputed interest, whether he collected it and/or gifts it back to you or not. It won't be a huge tax cost, but not nothing either. One alternative is for him to gift you the lump sum. There would only be taxes owed after he passes away if his estate is worth more than $13M (single) or $26M (married). Some states have a much lower exemption, however. If the chances of him leaving an estate greater than this size is neglig...

Hello bogleheads, I am 22 years old and very recently received a $2.5 million dollar windfall due to the death of someone I love in my family. Not taxable based on my research and the circumstances (meeting with someone this week to verify this). I know there was a similar post here a few years ago (https://www.bogleheads.org/forum/viewtopic.php?t=301519) but I decided to make a new one since my situation is a bit different About me -Currently no stable income as I am finishing up my Masters this spring. Have a bachelors degree. $20k in student loans -$500 a month rent, paying using savings from previous internships -Plan on getting a permanent job in my field that pays $55-60,000 this summer -No credit card debt, good credit score -Planni...