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What to consider before lending money to family and friends


When your best friend views your nest egg as a source of start-up funds for his latest business venture, or your nephew hits you up for a car loan, your first impulse may be to reach into your bank account to help. But it's a fact that loans to family and friends often end up straining both finances and relationships. As Shakespeare said, "Loan oft loses both itself and friend." In other words, if you lend money to friends, you often don't get paid back, and the friendship itself may disintegrate.


It's best to consider a loan to someone you love as an "arm's length" transaction. If you're pondering such a loan, keep the following in mind:


* You can just say "no." It's your money, after all. Do you really want to raid an emergency fund or dip into your child's college account to finance a friend's business idea? Think like a bank. It's reasonable to ask tough questions about the person's bank accounts, potential sources of income, planned use of loan proceeds, and spending habits before extending credit.


* Consider a gift. If you're comfortable sharing your resources, you may want to provide a monetary gift with no strings attached. In many cases, this is the best solution because neither you nor your friend expect the money to be paid back. Unlike a loan, this type of arrangement can forestall misunderstandings and hurt feelings later on. Of course, you should not give money if doing so would unduly strain your own finances.


* Formalize loans. If you decide to lend more than a small amount to a friend or family member, it's generally best to draft a written agreement. This can be as simple as filling out a promissory note (available online or at office supply stores). Such forms spell out the basic terms of the loan -- amount, interest rate, payback period -- and provide some limited protection should you and the borrower end up in small claims court. Another recent innovation is the use of direct lending (also called social lending or peer-to-peer lending) websites to facilitate loans between family and friends. For a fee, such sites can prepare loan documentation, send payment reminders, issue regular reports, even facilitate electronic fund transfers. If the loan involves a significant amount of money, check with your attorney.


Remember: Many personal relationships have been damaged when loans go awry. So proceed with caution.


31 July 2018
When Does Your Kid Have to File a Tax Return?

Posted in general

Did your kid get a part-time job during the summer? And now you were you wondering if your kid needs to file taxes for next year.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

If your kid has only a W-2, your kid needs to file a return if the total is more than the standard deduction. Starting in 2018, the standard deduction for a dependent child is up to $12,000. That means your kid can make up to $12,000 without paying taxes. That’s almost double from the 2017 numbers.

Here are two other things that you need to consider:

  1. Have your kid claim “exempt” on the W-4 withholding allowance form so that he does not have to file a tax return if he makes less than $12,000.
  2. Your kid should still file a return if he or she qualifies for the other credits like earned income credit, additional child tax credit, or refundable American opportunity education credit.

There you have it. That’s the new tax filing requirement for 2018.

Until then, this is Noel Dalmacio, your ultimate CPA at

Last Updated by Admin on 2018-07-31 06:48:22 PM