Planning to gift money to a family member for a real estate purchase and want to know the tax implications it may have? Keep reading to get the facts:
1) The amount of the gift determines the tax amount.
If the gift is under $13,000, it is non-taxable. If you want to gift more than that but still want to try and avoid taxation, here is a suggestion: You can gift your amount in the form of a loan. The loan should have all the normal components, such as interest and repayment terms. Then, at your discretion, you can forgive repayment one year at a time, forgiving only the maximum amount allowed ($13,000) per year. Be sure to check with your tax accountant for any changes or updates to the tax laws.
2) Gift: Income or not?
Not. The IRS will not recognize the gift as income which is good news for the receiver (donee).
3) If I try to refinance later down the road, will I need another gift letter?
If the money has been in your account for at least two months, you will not need another gift letter from the donor. If it has been in your bank account for less than two months, the lender will require a gift letter and possibly a verification of the donor's funds (pay stubs, bank statements, etc.).
For more information on real estate gifting or any other real estate information, please contact us at 888-988-6248 or visit us on the web at www.choicehomeshawaii.com.