I have a student loan in my name and I just got engaged (Yay!) about 2 months ago. My fiancée has been saving up and is really interested in helping us get out of debt before the wedding. I think we can do it but I would most certainly need her help.
Question:
Are there any tax issues (or any issues for that matter) with her transferring me money to pay off the loans or should I add her on my loans and directly take it out of her account? I don't want to make it seem like I made that money.
Congratulations on your engagement, and on your desire to begin your marriage debt free.
Your fiancée can give you up to $14,000 per year as a gift without having to pay any gift tax. Above that, there are lifetime gift/estate tax exclusions that apply. You, as the recipient of the gift, do not pay any tax on it. (It is not considered income for you.)
Having said that, I would not advise the two of you to have her pay money on your debt before you are married. The reason is this: You aren't married until you are married. If something happens between now and then and the wedding is postponed/called off, you do not want to feel like you are in debt to her, and you do not want her to feel that she lost money because of you.
Obviously, you do not want or expect that to happen. So, instead, I recommend that your fiancée saves up her income. I'm assuming that the two of you don't want to go into debt paying for the wedding/honeymoon, so make sure that you have enough cash to pay for that. After that is covered, she can save money toward your student loans, but keep the money in a savings account. Once you are married, the money and the debt both belong to both of you. The day after the two of you get back from the honeymoon, she can write the check to pay off the debt, and you've got a great start to your future.
You don't state your age, debt amount, loan rate, and amount of retirement savings. These facts impact the strategy you pursue:
If your student loan interest is at low rate, it is more effective in the long run for you to prioritize 401k match contributions or Roth IRA contributions. Your student loan interest will be tax deductible.
You may be able to file taxes separately as a married couple. This will keep your monthly loan payments lower than if you file jointly, allowing you to do tax-deferred savings (401k/Roth).
I share the concerns about commingling your finances before marriage. You'll be married soon enough, and after that the $14k/yr gift tax concern won't even be an issue.
