How much will I be taxed on gift equity of $38,000?

Question

My dad is gifting me $38,000 in equity on the house he is selling me. Is there a way I can figure out how much I will be taxed on this gift? (Besides consulting a tax pro)

Answer 1

You will not be taxed on the gift. Your father should file Form 709 to record the gift and have the gift subtracted from his lifetime exclusion of $1 million. Unless he has lifetime gifts of more than $1 million, he will not owe gift tax even though Form 709 must be filed.

Have the house appraised to determine the amount of the gift.

Answer 2

You, as a receiver of the gift, wouldn't pay tax on it because it's not "income." Your dad may or may not have to pay tax on it. The other answerers have mentioned the lifetime exclusion, but that would be a last resort. The IRS allows a $12,000 exemption for gifts between individuals. In other words, your dad could give you $12,000 of the equity that wouldn't reduce his lifetime exclusion. But if your dad is married and owns the property jointly, his wife could gift you $12,000 in addition to your dad's gift. That puts you at $24,000. If you're married your spouse can receive $12,000 in gifits from your dad and his wife as well. That puts you at $48,000 in exempted gifts...well over your $38,000 (you should get a third party appraisal to verify that equity amount). And none of that $48,000 counts against anyone's lifetime exlusion.

Regardless, you don't pay tax. But your dad should discuss it with his tax preparer when he files his taxes next year.

Answer 3

As the recipient of the gift, you won't be taxed. If any gift tax is due, it's paid by the giver.

Your dad will have to file a gift tax return. Unless he's given major gifts before, there probably won't be any tax due on this, he can use part of his lifetime exclusion.