Posted on: 31st Dec, 2009 08:26 pm
two years ago my mother purchased a house that my husband and i have been renting from her. as of jan 2010 she is filing a quit claim deed and deeding the house to us. our plan is to refinance the house in our name. we live in washington state and my question concerns the excise tax due.
according to the tax code we would have to pay excise tax on the debt in the house. however there does seem to be a clause that applies to our situation which states "there is a rebuttable presumption that the transfer is a gift and not a sale if the grantee is involved in a refinance of debt on the property more than six months from the time of the transfer." does this mean that if we wait 6 months to refinance we do not have to pay the excise tax on the mortgaged debt? (the quote above is from the wa state tax code wac 458-61a-201.)
thanks!
according to the tax code we would have to pay excise tax on the debt in the house. however there does seem to be a clause that applies to our situation which states "there is a rebuttable presumption that the transfer is a gift and not a sale if the grantee is involved in a refinance of debt on the property more than six months from the time of the transfer." does this mean that if we wait 6 months to refinance we do not have to pay the excise tax on the mortgaged debt? (the quote above is from the wa state tax code wac 458-61a-201.)
thanks!
Hi fishbritt,
As per WA state Tax code WAC 458-61A-201, you are liable to pay excise tax on a real estate property transfer if it is considered to be sales transaction. If the grantor (your mother) receives no consideration from the grantees (you and your husband) in exchange for the transfer of property interest, the transaction is considered to be as gift and is hence exempt from excise tax.
You may not have to make any monetary payment to your mother to make it sales transaction. Even if you make payments towards the mortgage on the transferred property or assume the debt, it will be considered as a sale. You cannot also refinance and pay off the existing debt within 6 months of the time of transfer.
I think you should wait for 6 months before making payments towards the mortgage or refinancing the loan in your name. Once it is past 6 months, you can refinance the loan and take over the mortgage payments. This way, the transaction will not be considered as sale and you will not have to pay any excise tax. Nevertheless, I'd suggest you to discuss this with a tax consultant before going ahead with the transaction.
As per WA state Tax code WAC 458-61A-201, you are liable to pay excise tax on a real estate property transfer if it is considered to be sales transaction. If the grantor (your mother) receives no consideration from the grantees (you and your husband) in exchange for the transfer of property interest, the transaction is considered to be as gift and is hence exempt from excise tax.
You may not have to make any monetary payment to your mother to make it sales transaction. Even if you make payments towards the mortgage on the transferred property or assume the debt, it will be considered as a sale. You cannot also refinance and pay off the existing debt within 6 months of the time of transfer.
I think you should wait for 6 months before making payments towards the mortgage or refinancing the loan in your name. Once it is past 6 months, you can refinance the loan and take over the mortgage payments. This way, the transaction will not be considered as sale and you will not have to pay any excise tax. Nevertheless, I'd suggest you to discuss this with a tax consultant before going ahead with the transaction.
Hi fishbritt,
It seems that the clause that you've stated here means that you won't have to pay the excise taxes on the mortgage if you wait for 6 months to refinance. However, it would be better if you could contact your lawyer and clarify the whole issue. He will be the right person to let you know whether or not you will have to pay the taxes.
Thanks
It seems that the clause that you've stated here means that you won't have to pay the excise taxes on the mortgage if you wait for 6 months to refinance. However, it would be better if you could contact your lawyer and clarify the whole issue. He will be the right person to let you know whether or not you will have to pay the taxes.
Thanks