Piquing Your Interest

Yes, you read that right -- you should charge interest. The IRS will actually let you get away without the interest requirement if all loans between two parties are under $10,000. (Over that amount, you must charge interest or risk running into a rat's nest of tax issues involving the gift tax.)





No matter how small a loan, charge interest. Again, it's about respect: The person you're loaning money to needs to take this very seriously. I recommend using the Applicable Federal Rate published by the IRS.

Actually, it's three different rates -- one each for short-term (under three-year), midterm (between three- and nine-year), and long-term (more than nine-year) loans. The rates are tied to the commensurate Treasury rates; right now, all three are hovering around 5 percent. By the way, that interest is taxable.