<p>We took out parent plus loans for our daughter's college education. She is a computer science major and will be taking a job after graduation that actually pays quite well. She would like to begin paying us back for part of her education but I'm not sure what kind of tax rules/limitations there are for her doing so. Has anyone gone through this who could help answer this question? Thank you.</p>
<p>Assuming that her paying the loan would be considered a taxable gift (and I’m not sure that’s the correct assumption, but I haven’t investigated one way or the other), there would be no reporting requirement or tax consequence if the total amount paid was $13,000 or less in any given year, assuming only one of you was a named borrower, and $26,000 a year if both of you were named borrowers.</p>
<p>If more than that, she’d need to file a gift tax return, and use up some of her unified credit, but there would be no immediate tax due.</p>
<p>I agree with allyphoe. I would also add that the $13k limit is based on calendar year, so she could give you (and your wife) $26k in December, then another $26k in January without any tax implications.</p>
<p>One additional point is that if any of the money that she pays back to you is interest (amount more than original prinicipal), you would need to report it as income on your income taxes.</p>
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<p>I don’t believe this is correct. You report interest as income, only if someone borrowed the money from you and you charge them the interest on that borrowed amount. This is not OP’s case.</p>
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<p>The gift money limit has nothing to do who was named as borrower on the loan. Even if you did not take out parent plus loan, your daughter can give you and your spouse 26K in gift money tax free per year. Also, the limit keeps on rising over the years, so you should check every how much money in gift she can you tax free.</p>
<p>I assumed the daughter would be making the loan payments, rather than giving her parents a chunk of money. Hence the issue of who was obligated on the note.</p>
<p>Does it all have to become so complicated? If the D is freely paying a few hundred a month on the loans, as her choice, does she really have to claim anything tax wise? The gov. doesn’t make you justify all your expenses every year. If she isn’t claiming anything regarding the payments (for tax credit or whatever), then does it really matter? (I’m picturing the simple “Sure mom, let me give you some money toward that” to become this big issue that goes beyond common sense!</p>
<p>My son wanted to give me money to repay the Plus loans I took out for his college education. I believe at the time I got a tax credit or deduction for all or part of the Plus loan payments. There was no way he could claim the tax break. So he just gave me unencumbered money (subject to gift limits as stated above) and I made payments on the loan and claimed the tax benefit. He is a good boy 
and he appreciated the sacrifices I made for his education.</p>
<p>Alooknac has the right idea. As a tax professional I would always say you want to be able to take the tax benefit if you are eligible. It doesn’t sound like you are going to come anywhere close to the gift limits. Remember if the annual amount is less than $13,000 then there is likely no paperwork involved. If you want to message me I would be happy to provide more information I just need to give you a disclosure.</p>