<prompt> Human: First off, I understand the dangers of lending to friends.Im looking for the technical info. Since the amount is under the 13k gift limit, would I need to charge the short term AFR of 1.79-1.81? Do I need to pay taxes on the interest earned? Does anything change with charging a higher rate like 10?  <response>: The gift tax is irrelevant as this is not a gift.Yes you need to declare the interest earned from the loan. 