Buying a home mostly funded by parents, tax implications?

Question

I'm looking to buy a home that will be paid for predominantly by funds from my single mother, roughly around a $150k "donation" that she isn't looking to have paid back. It's simply a gift of sorts, and neither of us are looking to give any of that money to Uncle Sam through the gift tax.

Also, we're not looking to apply any of this "gift" towards the $1,000,000 lifetime exclusion limit against her estate, because should I outlive her, her estate will go to me and may likely be worth more than the 1 million, so cutting into that limit now is not an option either.

My question is: What's the best way she could basically buy me the house, put it solely in my name and avoid paying huge amounts of taxes on it whether now or in the future when I sell the house?

I truly thank you for any guidance you can offer.

Answer 1

If she gives you a gift of more than $12,000 in one year, it has to be reported and counted toward her lifetime exclusion. There is no way around that.

Would it work for you to have her name on the deed and she give you the house over a period of time? That would avoid the lifetime exclusion problem.

When you sell the house, as long as you have owned and lived in it for two years, you can exclude $250K of gains on the house. Any gains in excess of $250K you will pay a maximum tax of 15% based on today's capital gains rate.

If your mother kept title to the house and you inherited it, you would only pay gains on the increase in value from the time you inherited it.

If your mother has an estate in excess of $2 million she needs to see an attorney about setting up an estate plan.

Answer 2

Simplest method is for her to finance the house for you, bought in your name. Each year she can forgive part of the debt without eating into the lifetime exclusion.

Get a lawyer to set it up, it's not difficult, but does need to be done correctly.

Answer 3

She can't there are specific limits (I think $10K) that you can get from her each year. She might be able to buy the house and deed 10% of it to you each year.

You should talk to a tax attorney.