How much is it safe to lend a friend or family member?

A common guideline is 1-2% of your liquid savings for anyone outside your immediate household, adjusted up or down based on their repayment history and how critical getting the money back is to your own plans.

Could lending money to family count as a gift for tax purposes?

If there's no real expectation of repayment or written terms, the IRS can treat an informal loan above the annual gift tax exclusion as a taxable gift. This is not tax advice; consult a professional for large amounts.

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Lending to Family or Friends Calculator

How much you can actually afford to lose — not just lend — before it hurts your own finances or the relationship.

How much are they asking for? ($)

Your liquid savings — cash, checking, savings (not your full net worth) ($)

Monthly take-home income ($, optional)

Your relationship to them

Immediate family

Close friend

Extended family / distant friend

Acquaintance / coworker

Their track record with money they’ve owed you (or others, if you know it)

Always pays back

No track record yet

Has been slow before

Has defaulted before

How critical is getting this back to you?

Not critical

Would hurt, but manageable

Critical to my own plans

If it’s not paid back, how easy would it be to bring it up again in 3 months? 1/5

😊 Easy😐 Awkward😨 Nearly impossible

What’s it for?

Planning to put this in writing (even a simple note)?

Why this is riskier than the dollar amount alone suggests:

Three ways to look at it

Need to respond to them? Here’s a draft.

This is a planning tool, not legal, tax, or financial advice. Gift tax rules, AFR interest requirements, and loan documentation vary — consult a tax professional or attorney for any loan of meaningful size.

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More than a quarter of people who’ve lent money to someone close to them say it damaged the relationship, according to a CreditCards.com survey. Not because the math was hard — because nobody did the math at all. The decision got made in the moment, under social pressure, with a number that felt right rather than one that was actually safe.

The advice columns all say the same thing. None of them do the math for you.

Financial advice on this topic is remarkably consistent: lend only 1-2% of your liquid net worth to anyone outside your immediate household, know your own risk tolerance, be honest about whether you’re really making a loan or a gift. Every article repeats it. None of them ask you for your numbers and tell you what that actually means for the specific person asking you for money right now. Calculators in this space — and there are several good ones — handle amortization schedules and IRS Applicable Federal Rates for loans you’ve already decided to make. They start after the hardest decision, not before it.

Why the same dollar amount isn’t the same risk twice

$1,000 from a sibling who’s never missed a payment is a different proposition than $1,000 from an acquaintance who’s defaulted before, especially if getting it back actually matters to your own plans. The calculator above keeps those two things separate on purpose: a dollar-based ceiling from your liquid savings, and a relationship-risk layer from the context you provide. When the relationship factors are bad enough, they can push a dollar amount that looks “balanced” on paper into something you should treat as “high exposure” instead.

The gift tax question nobody wants to ask out loud

The IRS doesn’t care that you called it a loan if you never expected to be paid back. Above the annual gift exclusion (roughly $19,000 per person as of 2026), an undocumented “loan” with no real repayment terms can be treated as a taxable gift — to you, the lender, not the person you helped. It’s a narrow situation that mostly matters at larger amounts, which is why the calculator only raises it when the number gets big enough to be worth knowing about.