Getting a loan from overseas....taxed or not?

This is a complicated situation but I am going to try to explain this as easy as I can. My in-laws are dutch. They live overseas and are loaning us 56k to pay the second mortgage of our house. The reason they are doing this is they want us to have more equity in our house than just 5% (we will have 20% after we accept their money). They cannot just %26quot;gift%26quot; us that amount of money overseas because their government will tax them so they actually have to charge us 3.5% interest (the lowest rate they can) for an interest only loan. I have several questions about this...1. If we transfer it, can we transfer the entire amount without getting taxed on it here (if a $56k amount hits our bank account in the US, I think they will alert the IRS..right?)? Should we transfer this in smaller amounts little by little.

2. We will be setting up an American account to pay the interest back to them monthly. We are currently paying 8.12% on our second mortgage....so we will save $200 a month with the loan

Getting a loan from overseas....taxed or not?

In the U.S., there is no tax on borrowing money. However,

1) If you fail to pay it back, you must pay income tax on the %26quot;forgiven%26quot; debt.

2) If you kept the mortgage, you could deduct the interest on that. However, you cannot deduct the interest on a personal loan (especially from a relative). You lose the mortgage interest deduction in your plan.

3) Under U.S. tax laws, a person here who makes a loan to a relative at below market rates must pay income tax on the interest that they would have received if they had charged interest rates. I do not know what taxes must be made by Dutch persons loaning money to U.S. citizens.

Getting a loan from overseas....taxed or not?

A loan is not income, so there is no tax to you upon receipt of the money.

If this loan is not secured by your home, then it is not a mortgage. Therefore the interest you pay on this loan is not deductible. Just FYI, not to say this isn't a good transaction for you.

Getting a loan from overseas....taxed or not?

Borrowed money is not income because you must repay it.

Getting a loan from overseas....taxed or not?

You should consult a Tax Attorney to be sure you have your %26quot;assets%26quot; covered in this, but I have been advised by a professional tax preparer that, as others have said, since this is a loan, it is not taxable. Make sure you have something in writing that clearly states that it IS a loan and not a gift, because gifted money is subject to a Gift Tax.

There is no need to break up the money transfers into smaller increments. Homeland Security regulations automatically flag any transaction over $6000 (it used to be $10,000), so unless you want a whole bunch of really small transactions, there's no need for that. The IRS will not take taxes on money that is loaned to you.

And be thankful you have a family willing to help you like that. That's awesome. Cheers to you.