do i have to pay capital gain tax if my mother gifts me her house and i sell it years later i own my own house

Question

my mother still wants to live in the house for several years

Answer 1

Basically, yes. You will pay capital gains tax on your period of ownership if it is not your principal private residence. This would be on the basis of the gain from the date of your mother's transfer to you to the date of sale - so you may need a valuation at the relevant date, which would probably be cheaper to get at the time than retrospectively! There are planning tools that can be used so that some of the gain is exempt, broadly based around you living in the property yourself at some point, but you will need to see an accountant to determine the best route forward for your particular circumstances.

Also, what are you trying to achieve by her gifting you the house? Is it to avoid it being included in her estate for inheritance tax? If so, she will only succeed if she pays you a market rent - otherwise she will have made a gift with reservation of benefit and still be taxable.

Even if that is not the case, there may be an income tax charge under the pre-owned asset regime.

So the gift might not be a good tax move for your mother to make - there are several taxes to be considered, and it is not entirely clear what your or your mother's main aim is here - so you really should seek advice from a local accountant to avoid incurring any unnecessary tax charges.

Edit - The next two answers are relevant to US taxes - the above is for UK issues.

Answer 2

I'm assuming you're talking US taxes. I've no idea what other countries do.

Capital Gains tax will be calculated on the difference between the sale price and the Basis. If she gives it to you, you receive her Basis.

On the other hand, if you inherit it, you will receive a "stepped up basis" which is the value at some point at or near the time of inheritance. Going this route can reduce your capital gains.

The tricky part is knowing whether her entire estate will exceed the exclusion. If the house is the only asset, it probably won't, in which case you're better off tax wise inheriting it in the estate. On the other hand, if the estate is large enough that removing the house is desireable, pay attention to whether or not her Basis exceeds the amount she can give to you annually. It may be necessary for her to give it to you in annual increments to avoid a Gift Tax issue. In other words, you might need to use four deeds, one per year, each for a 25% interest in the house.

Spend a few hundred and see an Estate Tax attorney. Do it right, as a mistake might cost you thousands in taxes.

Answer 3

Suggest you check out life estate angle. Your mother signs house over to you and retains life estate which gives her right to live in it as long as she lives. When she passes it becomes yours without probate or anything. Property transactions between family members are exempted under 600,000 (check exemption amount). You would have to determine your basis in the house and if you sell it any gain above basis would be long term capital gain subject to tax.

Answer 4

i'm no longer conscious of the guidelines, yet i comprehend this varies by using state... once I ran your question by using somebody extra knowledgeable in this remember, i replaced into advised that if the version between the preliminary paying for value of the domicile and the present advertising value of the home is under $250,000... then, some states do no longer require capital features. (?) in spite of all of that, although, a great concentration could desire to be the present subject of the domicile. You pronounced that it replaced into in "detrimental subject." Do you intend to make maintenance? If no longer, as time passes, the subject will in basic terms worsen, lowering the fee. And, final, yet in no way least, you ought to additionally contemplate how your mom feels approximately advertising the domicile. elderly human beings replace into very related to their residences, and understandably so. i'm uncertain what subject your mom is in (wellbeing-smart). together with her age, although, she could prefer living with you, somewhat than being on my own. if so, that could desire to be an perfect subject, which will make it easier to the two to celebrate with one yet another's agency. :) i will declare one extra prayer for you the two, and pray that He leads you to the main appropriate answer in this remember. Take care and could God bless.

Answer 5

yes!