Borrowed money
If someone borrows you money by check, should you deposit the check into your account or take the cash? Are there tax ramifications and does the amount of money given matter?
Terry Says
Anyone can “give” money to anyone else — in any amount. Only when you start giving much larger amounts (think over $1 million) do you have potential issues with “estate taxes.” I take it that is not an issue here.
But you used the word “borrow”! Does that mean they are LENDING the money to you, with the expectation of repayment? In that case, you should document the transaction — or at least THEY should want you to sign a letter promising to return it, and in what time frame. And say if there is any interest being charged on this loan.
No, it doesn’t matter whether they give you cash or a check. You can deposit it and it is not considered income if you are not working for them. But they would probably want to give you a check that you’d have to endorse and deposit — to add to proof of the loan if you don’t repay!
Again, if this is a gift, it doesn’t matter. Just make sure both parties understand clearly whether this is a gift or a loan!
