Parents helping me with the downpayment on a house, need to pay taxes on that money?

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My parents might be helping me with the downpayment on a house in the form of cash/check to me. Do taxes need to be paid on that money? How do rich families do it?
 

Roland Deschain

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My parents might be helping me with the downpayment on a house in the form of cash/check to me. Do taxes need to be paid on that money? How do rich families do it?
No. Just talk to your mortgage broker about having them fill out the federal gift letter. They can give you a one-time gift for a down payment that you don't need to claim, and they don't either
 

MarkT

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First, congratulations.

Second, you should consider consulting a tax accountant and real estate attorney and not rely on a web forum for accurate info. You`ll get opinions here for sure but not not sound legal advice.

Anyway, enjoy your new home!
 

Roland Deschain

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My father gifted me down payment money for my first apartment building. It's perfectly legal. there is a specific letter that you need to fill out. Like I said. Talk to you mortgage broker, and if you're still nervous, talk to somebody an accountant. basically you just have to sign a letter saying that it's a gift, and there is no expectation of repayment. I paid him back when I sold the building, but it wasn't necessary.
 

meh

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Unless there's some exception I don't know about that makes it more, each parent can give you $15K per year with no federal tax implications. Mortgage companies will need to know about gifts used for the purchase of real estate.
 
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Talk to an accountant, there is some kind of maximum “gift” a parent can give over a lifetime. Years ago we were fortunate enough to buy and gift my daughter a property, there is some kind of tax form that she had to file and I believe just resubmit annually. No tax paid on the amount.
 

Prepper

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You only have to actually pay additional money towards taxes, due to a gift, if over a life time you gift over something like $5 million. The idea here is to try to catch people avoiding having their estate eaten up by death taxes, by giving all their money away before they die to prevent its taxation. Less than that, and it is just a tax form you have to file for gifts over the annual limit to another person. It was $14,000 per person last time I checked, so if you're married and have 2 parents, that's $14,000 * 4 = $56,000 per year before needing to fill out the form.

And, the gift giver fills out the form, not you.
 

mibro

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You only have to actually pay additional money towards taxes, due to a gift, if over a life time you gift over something like $5 million. The idea here is to try to catch people avoiding having their estate eaten up by death taxes, by giving all their money away before they die to prevent its taxation. Less than that, and it is just a tax form you have to file for gifts over the annual limit to another person. It was $14,000 per person last time I checked, so if you're married and have 2 parents, that's $14,000 * 4 = $56,000 per year before needing to fill out the form.

And, the gift giver fills out the form, not you.
Close but no cigar.

It's $15,000 per year and $11.4 million lifetime now. I didn't know the lifetime limit was so high.

So the OP's parents can give him just about any amount tax free as long as they file IRS Form 709 with their tax return.

Nice.
 

Prepper

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Close but no cigar.

It's $15,000 per year and $11.2 million lifetime now. I didn't know the lifetime limit was so high.

So the OP's parents can give him just about any amount tax free as long as he includes IRS Form 709 with his tax return.

Nice.
Once the limit exceeded $1 million, I was like "well, I guess I don't have to worry about what this limit is any more." It's a nice problem to have.
 

mibro

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Once the limit exceeded $1 million, I was like "well, I guess I don't have to worry about what this limit is any more." It's a nice problem to have.
Yeah, really. I learned something I didn't know. Now if only both my parents weren't dead and penniless while alive. :(
 

blindfire

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No. Just talk to your mortgage broker about having them fill out the federal gift letter. They can give you a one-time gift for a down payment that you don't need to claim, and they don't either
/END THREAD

Did that when we bought our house. Wife's dad ponied up a good chunk for our down payment. Helped us avoid PMI on the loan.
 

Rob Boudrie

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Talk to an accountant, there is some kind of maximum “gift” a parent can give over a lifetime. Years ago we were fortunate enough to buy and gift my daughter a property, there is some kind of tax form that she had to file and I believe just resubmit annually. No tax paid on the amount.
If you give over $15k to a person in one year (each parent gets the $15k limit even if filing jointly) no problem. Above that you need to file a form (I think it IRS form 709) that deducts the amount of the gift from your estate tax exemption when you pass.
 

quincy

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We just got tapped for a $10K gift to my stepson to purchase a house. No tax because it’s under the 15K radar. But had to sell some stocks so, bam, here comes the long term capital gains tax.
Then stock goes up $30 a share shortly thereafter. Oh well.

Note to children: don’t ever ask your retired parents to gift you money. Go rent and save your money then buy a house. Just my 2 cents. I’m not happy.
 

mibro

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/END THREAD

Did that when we bought our house. Wife's dad ponied up a good chunk for our down payment. Helped us avoid PMI on the loan.
There's nothing like that sweet, sweet OPM.

My wife's dowry was a loan at market interest rate which I repaid in full. lol.
 

Prepper

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So if I "gifted" my son three mortgage payments while he was laid off, is there any tax liability for either of us?
No, unless the total was over 15k. That is 5000 a month, quite a hefty mortgage payment.
 

NH_Realtor

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My parents might be helping me with the downpayment on a house in the form of cash/check to me. Do taxes need to be paid on that money? How do rich families do it?
They'll also have to source the money, show the bank where it came from. Most likely provide their last 2 bank statements or wherever they hold the money.

Just in case it's currently under the mattress.
 

Rob Boudrie

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This is all crap. The money in a bank account is yours to do with what you want. Make a cash withdrawal in $100 bills and hand it to them. Jack.
A problem is banks often look a couple of statements back when granting a mortgage and requires that any "new money" is not a loan and thus a liability on the borrower's balance sheet.
 

garandman

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snax

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An old accountant/bookeeper I had that also worked for the IRS once told me....
Unless they audit you, the IRS doesn't know anything unless you (or someone else) tell them.
That being said, if the $$ is coming from their account to yours, there is obviously a paper trail and reporting system.
All in the name of stopping drug dealers and mobsters....not to shake down taxpayers for every extra cent they can.
 
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