How Should I Give A Loan to My Son to Avoid Tax Problems?
It is recommended to use a promissory note when making a loan to a family member so that it's note construed as a gift by the IRS.
It is typically recommended to include an interest rate as well. The $5,000 amount involved shouldn't raise a gift tax issue, since the current federal annual exclusion is $13,000 for individual gifts or $26,000 for gifts by spouses. However, the gift tax will not apply until you give away $1,000,000 in your lifetime.