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lifesurfer · Feb 27, 2010, 03:14 AM

I am planning to take out money from my IRA account and gift it to my best friend (to help him put down a down payment on his first home.) if I do this, can I get any sort of tax break? And how? And is there a limit on how much or how little I can give as a gift to qualify for a tax break? Thank you for your help!

ebaines · Mar 1, 2010, 10:18 AM

No - you get no tax break. Why should you get a tax break for making a gift to a friend? Worse, if you are under 59-1/2 you have to pay the 10% early withdrawal penalty. And if the amount is over $13k (the annual exclusion amount for gifts) you will also have to file a gift tax form (although it's unlikely that you would actually owe any tax on the gift itself). Bottom line - this is definitely a really bad idea!

lifesurfer · Mar 1, 2010, 12:47 PM

Originally Posted by ebaines

No - you get no tax break. Why should you get a tax break for making a gift to a friend? Worse, if you are under 59-1/2 you have to pay the 10% early withdrawal penalty. And if the amount is over $13k (the annual exclusion amount for gifts) you will also have to file a gift tax form (although it's unlikely that you would actually owe any tax on the gift itself). Bottom line - this is definitely a really bad idea!

Thank you for the reply. I guess I was hoping that it could be akin to a charitable donation since it would go towards a good cause for someone in need. Any suggestions?

ebaines · Mar 1, 2010, 12:58 PM

Sorry - gifts to individuals are not charitable donations.

I am not trying to say that you shouldn't help your friend out - just don't use your IRA as the source of funds, and don't expect some sort of tax break. Also, if you do decide to make a gift, don't exceed the annual exclusion amount for gifts ($13K) without real good cause, as it makes your life more complicated and could have an effect on your estate planning for the rest of your life.