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

boiler_eng

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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.
Uh, I didn't know just asking for money was an option. Also assumed it was an option to say no.

Though the flip side is my mother joked her wedding gift was that my grandparents paid back the money she loaned them. (They had a flood and needed cash, she loaned it. Was surprised day of wedding that they paid it back early.)

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.
Yeah my in laws got caught on this. They unexpectedly had to close fast and for more than planned on a family house. A bunch of talking to the bank about which dollars they were most comfortable taking the down payment from.
 

rep308

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As stated each parent can give you $15K per year tax free, Gift Tax Limit 2019: How Much Can You Gift? - SmartAsset. They can also each give$15K to your spouse if you are married buying jointly. You siblings can also give you $15K each if you parents decide to give them money and they also decide to give it to you, wink, wink. I have a friend who just did this and they had to fill out a form for the mortgage company to explain the extra funds for their kid.
 

boiler_eng

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As stated each parent can give you $15K per year tax free, Gift Tax Limit 2019: How Much Can You Gift? - SmartAsset. They can also each give$15K to your spouse if you are married buying jointly. You siblings can also give you $15K each if you parents decide to give them money and they also decide to give it to you, wink, wink. I have a friend who just did this and they had to fill out a form for the mortgage company to explain the extra funds for their kid.
Yeah there was a form when my wife "inherited" money for a down payment. It was held by her parents till she was married and ready to buy a house. My BIL and SIL are still renting but have already eaten through at various times they "really needed to borrow money" apparently.

There might be more questions if most of the down payment is coming from gifts, but if it is just an amount less than 1/2 or 1/3 or 1/4 (I forget the %) than the bank just wants to know "Where did this come from??" and then files it away.
 

one-eyed Jack

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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.
I see. My last house purchase was 51 years ago, so I'm a bit behind the times. I sold the house in Meffa and moved to Acton. I had to drive the elderly bank manager to Acton to check out the house. He liked it, approved the new loan and the bank's lawyer did all the paperwork for $25. Of course it was easy since I, my brother and my parents all were customers of the little West Medford Savings Bank. Jack.
 
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Go rent and save your money then buy a house.
On what planet is this possible? My mortgage on the house I just bought is only $150 more per month than my rent was prior. It would take 26.6 years to save that $150 per month to equal the amount I made for a down payment. Renting should only be used as a short term solution to give the renter flexibility and mobility. Beyond that, buy a home and start building equity instead of paying rent and building someone else equity.
 

garandman

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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.
The lending bank will request up to six months of records, looking for large deposits, and question the source.
 

Asaltweapon

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On what planet is this possible? My mortgage on the house I just bought is only $150 more per month than my rent was prior. It would take 26.6 years to save that $150 per month to equal the amount I made for a down payment. Renting should only be used as a short term solution to give the renter flexibility and mobility. Beyond that, buy a home and start building equity instead of paying rent and building someone else equity.
I'm shocked at the cost of renting. Well... for anything nice that is.
 
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$11.4 million lifetime now. I didn't know the lifetime limit was so high.
And dont I know it! Daddy was trying to gift $20M so I could buy that little cottage down at Menemsha. When he found out how much the revenue man was going to take his monocle nearly popped right out if his eye.
 
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I see. My last house purchase was 51 years ago, so I'm a bit behind the times. I sold the house in Meffa and moved to Acton. I had to drive the elderly bank manager to Acton to check out the house. He liked it, approved the new loan and the bank's lawyer did all the paperwork for $25. Of course it was easy since I, my brother and my parents all were customers of the little West Medford Savings Bank. Jack.
Ahhh yes, back when a 1,000 sqft house was affordable on minimum wage and a family could thrive on a 1 income blue collar check.
 

boiler_eng

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On what planet is this possible? My mortgage on the house I just bought is only $150 more per month than my rent was prior. It would take 26.6 years to save that $150 per month to equal the amount I made for a down payment. Renting should only be used as a short term solution to give the renter flexibility and mobility. Beyond that, buy a home and start building equity instead of paying rent and building someone else equity.
If you are $150/mo away from having 0 savings each month than you are already putting yourself in a bad situation.

Fairly sure his comment was saying if you don't have enough for a down payment and HAVE to get a gift then you need to figure a way to save more.

Gifts are nice, but if your balance sheet isn't set up to ensure building savings month to month you are likely to have a problem.

When I bought I then carried a lease for another 4 months after closing, so we were paying rent + mortgage. Can't do that if you have a low savings rate in the best of times. Or if you have repairs that come up which need cash to get fixed, gonna need someone to loan you money to fix it.

My mortgage was about $80 less than renting, but once you add in yard equipment, "small" fixes done here and there, and liability for fixing anything that might go wrong no doubt that owning a house is more expensive than renting an apartment.
 

Broccoli Iglesias

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I'm shocked at the cost of renting. Well... for anything nice that is.
It is crazy. I can rent my place in the city for $450-600 over what my mortgage (including taxes and insurance) is. Probably more since the last time I checked.

And I only bought it 2 years ago with 20% down.

The neighbors keep trying to shut down proposals to build condos. Guess who joined them in that fight? [laugh]
 

Broccoli Iglesias

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My mortgage was about $80 less than renting, but once you add in yard equipment, "small" fixes done here and there, and liability for fixing anything that might go wrong no doubt that owning a house is more expensive than renting an apartment.
Yes and no.

You cant compare a house to an apartment.

If you tried to rent an apartment with same SQFT (forget about the yard), that alone would probably cost more.

A lot of people compare only on cost, but the comparison is rarely apple's to apple's when you take into acocu t number of bathrooms, bedrooms, SQFT ...
 

boiler_eng

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Yes and no.

You cant compare a house to an apartment.

If you tried to rent an apartment with same SQFT (forget about the yard), that alone would probably cost more.

A lot of people compare only on cost, but the comparison is rarely apple's to apple's when you take into acocu t number of bathrooms, bedrooms, SQFT ...
Its a question of NEED vs WANT.

Rent what you NEED while you save to get what you WANT.

So yes, sqft to sqft buying the mortgage cost should be by definition cheaper than renting (unless the rental market is very weak and landlord has 100% equity so they just have to cover holding costs).

A couple can live in a small apartment with 1 bathroom but it sure is nicer to have room to get away from each other and to not be beating down the door because someone is taking a shower and you have to use the toilet.
 

one-eyed Jack

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Ahhh yes, back when a 1,000 sqft house was affordable on minimum wage and a family could thrive on a 1 income blue collar check.
Yes. When I built my first house in Meffa I had already owned the land. A $10,00 construction loan was enough. My first mortgage payments P,I,Taxes, was less than $100/mo. Not any more. Jack.
 

Tinkermatic

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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.
That’s sound advice. If only my rent wasn’t the equivalent to a $400,000 mortgage. Then maybe I could save some money for a down payment, or to move to a more affordable area where the pay is also less equitable.
The cost of living has far outgrown pay increases, especially on the coasts. Being retired and all I’m sure you realize this.

Edit- It’s been a rough day. I apologize as I’ve no one to blame but myself. Just poor and pissed at the moment. Carry on, gents.
 

Broccoli Iglesias

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That’s sound advice. If only my rent wasn’t the equivalent to a $400,000 mortgage. Then maybe I could save some money for a down payment, or to move to a more affordable area where the pay is also less equitable.
The cost of living has far outgrown pay increases, especially on the coasts. Being retired and all I’m sure you realize this.

Edit- It’s been a rough day. I apologize as I’ve no one to blame but myself. Just poor and pissed at the moment. Carry on, gents.
If you dont have kids, there is not reason to pay that much in rent while you save.

I was living in Brigton center, renting on the top floor (4 floor building) and paying around $1800. This was 2 years ago.

It was only 1bdr and 1bathroom. A 2bdr in the building would have been an additional $200-300.

But it was fine while saving and looking for a place.

There were places near by that added "Luxury" to the condo name and rented the same size apartment for $3,000. I never understood that. There was nothing luxury about the so called "Luxury" buildings.
 

Tinkermatic

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If you dont have kids, there is not reason to pay that much in rent while you save.

I was living in Brigton center, renting on the top floor (4 floor building) and paying around $1800. This was 2 years ago.

It was only 1bdr and 1bathroom. A 2bdr in the building would have been an additional $200-300.

But it was fine while saving and looking for a place.

There were places near by that added "Luxury" to the condo name and rented the same size apartment for $3,000. I never understood that. There was nothing luxury about the so called "Luxury" buildings.
We're in a 1bd/1bth for less than $1800. That's still the equivalent of a 30yr. mortgage payment on a $400,000 house(down payment not withstanding). I'm in and out of the places you described on a daily basis. They put 'em up fast and the build quality is terrible. There's a huge new building on the VFW that's renting near or above $3,000 and it's absolute garbage. Moving further from the city only increases travel time and fuel costs, especially in the truck, which I need for my current job. Rent outside of 495 is still in the $1400-$1500 range and I believe a forum member listed an apartment at just that earlier this week, so the business case doesn't add up. I edited my post to reflect that my having problems is just that; my problems. There is however, no arguing the current ridiculous home prices in relation to pay. That's an over 200% increase in 8 years.
Just waiting for the next bubble to pop, I guess. Homes.png
 

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If you dont have kids, there is not reason to pay that much in rent while you save.

I was living in Brigton center, renting on the top floor (4 floor building) and paying around $1800. This was 2 years ago.

It was only 1bdr and 1bathroom. A 2bdr in the building would have been an additional $200-300.

But it was fine while saving and looking for a place.

There were places near by that added "Luxury" to the condo name and rented the same size apartment for $3,000. I never understood that. There was nothing luxury about the so called "Luxury" buildings.
The best part about that stuff vs a typical cheaper urban ghetto-lyfe apartment is off street, garaged parking. Street parking (especially in an overbuilt urban area) sucks donkey balls. Even some houses with driveways are a pain in the ass because you have to play a chinese slide puzzle game with the tenants to get your car in the driveway.

Friend of mine just put up a building in Brighton, best part of the thing is it has a parking garage in it. I think the studio units are well over 3K a month but I haven't looked at the pricing. The big ones are 5-6 grand but they have more SF than my ranch house does. Minimum income to get an apartment in it is 100 grand. And his building is cheaper than the others going up in the neighborhood, and the thing is already like almost half full
and it just got occupancy not long ago...

-Mike
 

Broccoli Iglesias

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The best part about that stuff vs a typical cheaper urban ghetto-lyfe apartment is off street, garaged parking. Street parking (especially in an overbuilt urban area) sucks donkey balls. Even some houses with driveways are a pain in the ass because you have to play a chinese slide puzzle game with the tenants to get your car in the driveway.

Friend of mine just put up a building in Brighton, best part of the thing is it has a parking garage in it. I think the studio units are well over 3K a month but I haven't looked at the pricing. The big ones are 5-6 grand but they have more SF than my ranch house does. Minimum income to get an apartment in it is 100 grand. And his building is cheaper than the others going up in the neighborhood, and the thing is already like almost half full
and it just got occupancy not long ago...

-Mike
The one I was renting had off street parking. No way I was going to deal with buses driving inches from my car and having to move my car during winter for a storm or on cleaning days. F*** that noise. I travel a lot for work, and I would not inconvenience myself parking in a strategic location in case there is a storm.

Anyway ... the point is, there are non-ghetto apartments for well under a $400K mortgage payment amount.
 

Broccoli Iglesias

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We're in a 1bd/1bth for less than $1800. That's still the equivalent of a 30yr. mortgage payment on a $400,000 house(down payment not withstanding). I'm in and out of the places you described on a daily basis. They put 'em up fast and the build quality is terrible. There's a huge new building on the VFW that's renting near or above $3,000 and it's absolute garbage. Moving further from the city only increases travel time and fuel costs, especially in the truck, which I need for my current job. Rent outside of 495 is still in the $1400-$1500 range and I believe a forum member listed an apartment at just that earlier this week, so the business case doesn't add up. I edited my post to reflect that my having problems is just that; my problems. There is however, no arguing the current ridiculous home prices in relation to pay. That's an over 200% increase in 8 years.
Just waiting for the next bubble to pop, I guess. View attachment 297458
I just checked, you are right. The mortgage with 20% down and 3.87 interest rate is around $1500.

But you need to add taxes to that as well. That alone can add $500 or more depending on the town.

And insurance. Right now you might have renters insurance which is cheaper than insuring a house, the building and its contents.
 

boiler_eng

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That’s sound advice. If only my rent wasn’t the equivalent to a $400,000 mortgage. Then maybe I could save some money for a down payment, or to move to a more affordable area where the pay is also less equitable.
The cost of living has far outgrown pay increases, especially on the coasts. Being retired and all I’m sure you realize this.

Edit- It’s been a rough day. I apologize as I’ve no one to blame but myself. Just poor and pissed at the moment. Carry on, gents.
Make more money.

Wife and I had rent of $2000 and were saving. If things were good we were at $2000/month saved. If "stuff" came up at least $750 saved that month.

Sucks but that's the only answer that has anything you can act on.

Of course I have a job outside the 495 loop and make decent money so affording a house near work is achievable. However I did years in Somerville to make the wife's job feasible so we had two incomes to goose the savings rate.

That's how you save for a down payment, with $2000 rent, maxing IRAS, and paying into 401Ks. MONEY

2000/mo for 2 years is 48k, that should get you enough to close on a 400k house without any gifts.
 
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Professional tax accountant here. After all of the above do you have any questions?
The paperwork from the mortgage guy is basically a letter telling the mortgage company that it is gift money and I am under no obligation to pay it back. He said it has nothing to do with the gov/IRS. He also said that parents can now gift $1 million (can't remember exact number) tax-free over my lifetime when it used to be $15,000 / year up to $1 million lifetime.

Does anybody here have millionaire parents? I'm trying to buy Tom Brady's house.
 
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