Posted on: 08th Jul, 2010 06:31 am
My mom wants to transfer her home and adjoining property to me because she's getting older and can't deal with the responsibilities any more. Is this considered a gift, and if it is what's the tax implication?
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Hi Audrey!
Welcome to forums!
If your mother transfers the property to you as a gift, then she will be liable for paying gift taxes. If she sells off the property to you and incurs a profit, then she will be responsible for paying capital gains taxes.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If your mother transfers the property to you as a gift, then she will be liable for paying gift taxes. If she sells off the property to you and incurs a profit, then she will be responsible for paying capital gains taxes.
Feel free to ask if you've further queries.
Sussane
Yes Audrey, this could be considered a gift. But there are certain legalities which you must check out before the property is being transferred. Firstly, a gift is any transfer of property from one individual to the other which will not include any return, in terms of money, from the grantee to the granter. However, this gift is taxable. But the tax on the transferred property has to be paid by the donor and not by the recipient and the donor will receive nothing in return. This is the gift tax.
However, there is also a process by which this gift tax can be exempted. The current US tax system allows a donor to transfer as much as 13,000 USD without being liable to pay any taxes. Within this stipulated amount of worth per year, gifting without taxes is possible. This is called the annual exclusion of taxes.
To maintain the status of annual exclusion, gifting has to be done without any compulsion whatsoever. If the gift is done under any condition, like paying for some other property, then usual tax will get attached.
So, to enjoy a tax free gift ask your mother to transfer the property following the stipulated amount of gifting per year. In that case no one has to pay any kind of tax on it.
However, there is also a process by which this gift tax can be exempted. The current US tax system allows a donor to transfer as much as 13,000 USD without being liable to pay any taxes. Within this stipulated amount of worth per year, gifting without taxes is possible. This is called the annual exclusion of taxes.
To maintain the status of annual exclusion, gifting has to be done without any compulsion whatsoever. If the gift is done under any condition, like paying for some other property, then usual tax will get attached.
So, to enjoy a tax free gift ask your mother to transfer the property following the stipulated amount of gifting per year. In that case no one has to pay any kind of tax on it.