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03-15-2008, 12:23 PM
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Senior Member
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Join Date: Jan 2008
330 posts, read 302,334 times
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Gift tax
Does anyone know if you receive money from a parent to purchase a house, do you have to pay gift tax on that money? I asked my broker and he said that each parent could give up to a million dollars each in their lifetime to a child as a gift and you do not have to pay taxes on it but anything after teh million can be taxed if you are given more than $12,500 a year. Is this correct? I asked someone at the bank and they told me to ask an account this question because she thought it was anything over $10,000 not anything after a million. I am asking this because my parents are giving us $50,000 towards a house so we can keep our condo and not have to seel short in this market and I want to make sure that we wil lnot have to pay taxes on it. Does anyone know the answer to this? Does it matter if my parents live in NY and we live in CT-are the laws different in each state??
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03-15-2008, 12:56 PM
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Real Estate Agent
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Join Date: Oct 2006
Location: Cheshire, Conn.
1,763 posts, read 1,723,067 times
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From what I've read, you as the recipient (donee) won't have to pay taxes on it. However, your parents might have to declare it on their federal taxes. It appears that a donor can deduct $12,000 from the amount given to a donee in the current year, but this is a one-time deduction per donee.
Also from the same source, it appears that individuals can give up to $2 million in Connecticut (aggregate over a lifetime, to one or many donees) before tax is due. Again, the recipient doesn't appear to have to pay tax unless the donor fails to do so.
DRS: IP 99(9), A Guide to the Federal and Connecticut Gift Taxes
http://www.ct.gov/drs/lib/drs/forms/...709booklet.pdf
http://www.ct.gov/drs/lib/drs/forms/...ct-706-709.pdf |
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03-15-2008, 01:07 PM
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Senior Member
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Join Date: Jan 2008
330 posts, read 302,334 times
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Why would the person giving the money have to pay taxes on it if they already did when they earned it? Isn't that being double taxed? Do you know if I have my parents get a bank check and pay for the downpayment so it doesn't get deposited into my account, will they have to pay taxes on that?
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03-15-2008, 01:16 PM
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Real Estate Agent
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Join Date: Oct 2006
Location: Cheshire, Conn.
1,763 posts, read 1,723,067 times
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Quote:
Originally Posted by MomOfToo
Why would the person giving the money have to pay taxes on it if they already did when they earned it? Isn't that being double taxed? Do you know if I have my parents get a bank check and pay for the downpayment so it doesn't get deposited into my account, will they have to pay taxes on that?
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Sorry, I don't have an answer to your first question.
I suspect you're going this route because if your parents claim it's a "gift," it won't present a problem with your financing. However, if your parents claim it's a "loan," things change. (Namely, the bank will ask about repayment.)
My advice would be to contact a mortgage broker. With the thresholds outlined on the links attached to my other e-mail, I don't believe anyone will have to pay taxes because of the amount.
Also note, if you sell (and close on) your condo in 2008, you could theoretically return the gift to your parents.
In any event, contact a real estate attorney. |
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03-15-2008, 01:39 PM
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Senior Member
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Join Date: Jan 2008
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Thanks-I do have a real estate attorney-I will cal lhim on monday. I asked the mortgage broker about this and he was the one that gave me the info on no tax if under 2million per parent, the bank person confused me. I hope your right! It would suck to have to pay anything!
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03-15-2008, 07:34 PM
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Moderator
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Join Date: Sep 2006
6,362 posts, read 5,390,361 times
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It's $1 million/parent, I believe. While a parent is alive, he/she can give up to $1 million to each child, tax free.
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03-16-2008, 01:46 AM
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Member
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Join Date: Feb 2008
Location: CT
49 posts, read 51,089 times
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does anyone know about grandparents? my home search is on hold for the moment, but they still plan on helping me when it resumes. we haven't settled on an amount yet, but it'd be nice to know what the limit is before taxes become an issue.
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03-20-2008, 08:26 AM
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Junior Member
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Join Date: Mar 2008
5 posts, read 7,516 times
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gift tax
same answer for grandparents, parents, or anyone else giving gifts...speak to a KNOWLEDGABLE attorney/advisor who knows the law AND understands the donor's situation...gift tax, generally, has nothing to do with the recipient, so if you're buying and your parents are giving you cash, anyone giving advice should know about your parents' finances and their gifting history
rationale of gift tax (and why the donor pays the tax) is that it is a complementary part of transfer taxes (the other part being an estate tax)...without a gift tax, people could simply give away everything before they die and avoid estate tax
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