My Mother in law is selling us her home for way under Fair Market Value. The mortgage broker wants her to give us a "Gift of Equity". How much can she give us without paying taxes on the gift. We are married with three children (not too sure if you need to know that, but I think she is allowed to gift to her grandkids too).
Appraisal=$245,000
Selling for=$116,000
GOE= $129,000
This will allow me to bring in zero money down and dropped our interest rate tremendously. Having said that, I don't want to harm her in anyway with paying alot of gift tax.
2007-05-22 10:38:37 · 4 answers · asked by LCH123 2 in Business & Finance ➔ Taxes ➔ United States
33% of what? She will have to pay 33% of the gift?
2007-05-22 10:43:43 · update #1
She can give you and your spouse each up to $12,000 for a total of $24,000. Unless you want your children to be on the deed of the house with you, and own part of your house (usually a very bad idea), she cannot gift equity to the grandchildren.
For the other $105,000, she will be required to file a gift tax return. Unless she has given a lot of gifts that required gift tax returns in the past, this will not be enough to trigger a gift tax.
Another way to do this which could avoid the gift tax return all together, would be for MIL to give you and your spouse $24k this year, and then hold a second mortgage on the home for $105k. Each year, she could gift you and your spouse $24k of principal and interest payments.
She would have to pay income tax on the interest she 'earned' from the mortgage, but at 6%, the most the interest would be is $6300 in a single year, which would result in an income tax that could be less than $1000, or possibly as much as $2000, depending on her tax bracket. If you didn't want her to pay, you could gift that money back to her.
Following this strategy, it would take 6 years to gift you the entire mortgage amount, at an interest rate of 6%.
Depending on what else MIL has in her estate, gifting a mortgage may be a better option than filing a gift tax return. MIL should consult with an estate planning attorney to determine what option would be the best for her situation.
2007-05-22 12:04:12 · answer #1 · answered by aj485 5 · 3⤊ 1⤋
the mortgage broker wants her to?
you answered your question in the first sentence. If she sells you the house she sells you the house. She is giving you a great deal, but not giving you money. Just draw up the loan for the amount you are paying for the house. I'd guess the broker gets a percentage of the amount he wants to claim as a gift??
2007-05-22 19:28:15 · answer #2 · answered by Jo Blo 6 · 1⤊ 1⤋
A gift tax return needs to be file for any gift over $12,000. As you are married, she could give you each $12k for a total of $24k
Unless she has made a lot of gifts in the past and used up her lifetime credit, she probably will not owe any gift tax.
She will probably end up sending in a Gift Tax return with a balance due of $0.00.
2007-05-22 17:46:22 · answer #3 · answered by Wayne Z 7 · 0⤊ 1⤋
33 percent I beleive
2007-05-22 17:41:21 · answer #4 · answered by Anonymous · 0⤊ 1⤋