Tips for Abiding By Tax Rules When Giving the Gift of Real Estate

gift of real estate Itís the time of year for giving. Christmas is just days away and the excitement is in the air for sure. Imagine getting gifted a new house! The gift of real estate is the gift that keeps on giving, and if you are in the place where you can do something like this for someone you love, you need to be sure to abide by the tax rules that are associated with giving such a large gift.
  • It may be a good idea to give the cash for your loved one to purchase a house instead of purchasing a house for them. You may think you know your relative or friend better than anyone but you may not know all their secret hopes and dreams because they may not tell you every little detail about themselves. If you give cash to your loved one to buy a home you need to keep the amount at $14,000 or less. The gift tax limit for a yearly gift called the annual exclusion allows you to give $14,000 cash or less to as many folks as you would like each year tax free.
  • Another great way to give the gift of real estate without disobeying any tax rules is to give the gift of a cash down payment. You will want to make sure that the loan officer knows that this is a gift and not a loan. You will need to fill out the appropriate paperwork so that the fact that the down payment monies is a gift will be well clarified, otherwise you risk your friend or loved one losing out on getting their mortgage.
  • If you would like to sell your childrenís childhood home to them you may do so but be sure that you are careful how you do it. Seller financing your home to your children is a great way to avoid being taxed to the max. In this type of sale you basically will be given a small down payment and you will hold the note on the property. This type of real estate gifting is great as long as you can trust your loved one to pay down the mortgage.
  • Selling your home to your loved one at a low ball price is another way to give the gift of real estate all the while abiding by tax rules. Of course the IRS may think you are crazy but once they see you are selling to a family member they will understand.
Remember if you do decide to give the gift of real estate to abide by the tax rules and regulations and you will be sure to have some excited recipients! Courtesy of Huntsville AL Real Estate Broker Mike Manosky!

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