I am interested in making a personal loan to a friend in order to facilitate a life change for him. Obviously, I don't want anyone to encounter any untoward tax consequences. My point is not to make money off of the loan, but it is my understanding that if the loan is not "fair market value", it runs the risk of being taxed as a gift. Does anyone have a source they would use to write up loan documents, including amortization schedules, and how would one go about determining a proper interest rate? It's honestly going to be a "handshake deal", but if anyone were ever to get audited I would want a good paper trail. Thanks in advance.

Here are the minimum interest rates.

https://www.irs.gov/pub/irs-drop/rr-24-15.pdf

I'd have a bad feeling about this if it ever had any expectation of repayment/collection by either side. But do what you gotta do.

He Who Shall Be Unnamed said:

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I am interested in making a personal loan to a friend in order to facilitate a life change for him. Obviously, I don't want anyone to encounter any untoward tax consequences. My point is not to make money off of the loan, but it is my understanding that if the loan is not "fair market value", it runs the risk of being taxed as a gift. Does anyone have a source they would use to write up loan documents, including amortization schedules, and how would one go about determining a proper interest rate? It's honestly going to be a "handshake deal", but if anyone were ever to get audited I would want a good paper trail. Thanks in advance.

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If treated as a gift, there is no tax to worry about, unless you have already gifted several million in the past. The tax would be born by you, the donor. If there are loan documents, then it isn't a handshake deal. This sounds like the sort of thing is likely going to end with you losing your money and a friend.

Amen. It's a gift.