ABSTRACT
Independent game development requires money in a capitalist society. While your parents would want to let you off the hook for interest, they still need to charge you AFR for the month the loan is originated and determine a proper term. If that loan has a rate below the relevant AFR, the IRS may go after your parents for what’s called imputed interest income. Repayment terms would also have to be clear, including the duration, so the correct AFR rate is used. The loan proceeds are taxable, and you’d be able to deduct the interest. Hand in hand with friend and family funding, spousal support also comes into play, because there are two important considerations with the gift tax that you should be aware of: gift-splitting and unlimited spousal transfers. To once again illustrate the importance of separating business from personal credit cards, credit card interest is deductible but only if it generated from business expenses.
