I am at a point where I can start repaying my parents for college. Is there any financially beneficial/smart way I can/should go about doing this? Or is using taxed income and mailing a check to them the best and only option?

  • Is there a note or anything for the debt? Or is this a my parents paid X for my college and I would like to repay them?
    – user4127
    Commented Nov 7, 2011 at 21:49
  • it's a 'my parents paid x' and i want to repay them. There was no loan agreement, so I don't owe any interest to them. Would it be best for them to write up an agreement in which the actual amount is say 1000 dollars, but the interest is 50%, such that they get the full amount and i can more easily deduct the interest accrued?
    – pyInTheSky
    Commented Nov 8, 2011 at 5:08
  • 1
    That would likely be a form of fraud or tax evasion, since there was no actual loan. Also, when your parents claim that as income, if their marginal rate is higher than yours, the three of you collectively could take a loss on that bit of paperwork.
    – jprete
    Commented Nov 8, 2011 at 14:02
  • 2
    There's no reason to repay your parents. Paying for your education is part of the decision they made when they had you. If you really want to repay your parents then the best way you can do that is to look after them when they are too old to do so themselves and to make the most of your education by making a good life for yourself and hopefully your new family.
    – Dunk
    Commented Nov 10, 2011 at 22:11

4 Answers 4


I know of no tax shelter that will allow you to repay money to your parents for the cost of raising you. They may have already deducted the cost of your education from their taxes. If they were unable to then the same restrictions that prevented them would prevent you from taking the deduction. If they were eligible for deductions and failed to take them it is possible that they could file an amended return for the years they were eligible. As they probably claimed you as a dependent you would most likely be precluded from claiming the deduction yourself. But you may want to consult a tax professional to be sure.

Your desire to repay the debt you feel to your parents for the cost of your education may be admirable, for tax purposes any payment in service of this perceived debt will be probably be considered a gift, and have the tax consequences of that status. I would talk over your repayment plans with your parents and come up with something that works for all of you. You may want to consider contributions to a retirement account which may lessen the tax implications, but still consult a professional to avoid nasty surprises from the IRS.

  • Thank you. Yeah, I wasn't looking to be duplicitous, just hoping there was a pre-tax way to repay them.
    – pyInTheSky
    Commented Nov 8, 2011 at 17:36

Was this a loan? If so, there should be an agreed interest rate, written agreement, and payoff schedule. If you itemize, you can include this interest, and your parents should claim it as income to them.

Edit - as I see the clarifications come through, I'm updating my answer. You can gift each parent $13,000 per year. That's it, you walk a dangerous path when you start to try to game the system.

  • Any thoughts to my comment above about having a low amount w/ a huge interest rate? Thanks for the assistance.
    – pyInTheSky
    Commented Nov 8, 2011 at 5:10
  • @pyInTheSky - Not all interest is deductible. It would most likely count as income to your parents.
    – user4127
    Commented Nov 8, 2011 at 14:08
  • well that's a bummer :\
    – pyInTheSky
    Commented Nov 8, 2011 at 17:37
  • @pyInTheSky As JoeTaxpayer said, you can gift them up to $13,000. If you're married, that goes up to $26,000. If you have a big pile of cash lying around other thing you may be able to do is a "Extreme Home Makeover" type move... rent their house and put in a new kitchen or something. Talk to an attorney before thinking about doing that. Commented Nov 16, 2011 at 14:17
  • @duffbeer703 - and if OP's both parents are alive, it can multiply to $52,000. 4X when a couple gifts another couple. Just keep track of checks, and write them separately. Commented Nov 16, 2011 at 15:00

As far as I can tell there's no way to deduct this repayment legally. If you use gifts, you pay income tax (and gift tax on the excess of $13k per person per year). If you use the high-interest pretend loan it might be tax evasion, and they legally have to pay income tax on the interest anyway. You could give them a year-long sinecure for the amount but, again, they pay tax on that income.

I think your best shot is to drop it into your own retirement accounts at a tax advantage, and ask them to deduct that value from your inheritance. They may have planned to do that anyway!


An alternative option: the agreement I made with my parents when they paid for my college education is that if/when I have kids, I'll put them through college.

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