Anyone here familiar with taxation/gifting property?

Submitted by mdimar03 t3_yy68uh in newjersey

Hello all!

Will keep this simple. Family member is gifting me and brother a house. We will be assuming mortgage and other brother will make this primary residence. He will pay mortgage.

What are the rules regarding taxation/gifting homes? What will me and brother be liable for? What will giving family member be liable for? Selling the home for 1$ vs ‘gifting’ is that a thing? What happens during the assumption? Can we define it as a gift or a sale? Trying to lessen tax burden for both parties as much as possible obviously but also want to make sure we do this right.

Not sure if this is the best place to post this but thanks for listening!

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Strakor521 t1_iwshgwa wrote

The cost of a real estate lawyer, which you need, will be cheaper than the tax liabilities that you will incur trying to do this with the guidance of internet commenters.

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Jackattack736 t1_iwsrg5y wrote

Agree with the other comment here, this is definitely a question for professionals. I work in tax and there's a lot of considerations to take into account before you initiate this transaction (you could be hurting yourself by forgoing a step up in basis upon the transferor's death, there will need to be a gift tax return filed regardless of if it's for $0 or $1 since both are below fair market value, estate tax considerations if there is significant wealth in the family, etc)

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mdimar03 OP t1_iwsuk7x wrote

Real estate lawyer or accountant???

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Jackattack736 t1_iwsv6rv wrote

You'll realistically need both. A real estate attorney will be able to help you file all of the necessary paperwork with the township and bank related to the mortgage, deed, etc. and an accountant will be able to help you with tax questions.

As an accountant, it's generally not advisable to transfer property this way. It's messy and generally does not work in anyone favor

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jim13101713 t1_iwt3b0u wrote

The tax burden should be minimal - there is currently a 12 million dollar lifetime gift tax exemption (basically your family member can give 12M dollar away without having to pay gift tax) and generally the receiver of the gift does not pay a gift tax or income tax on gift. That being said it is best to get professionals involved as others has stated. Check out https://www.nerdwallet.com/article/taxes/gift-tax-rate#:~:text=In%202022%2C%20you%20can%20give,file%20a%20gift%20tax%20return.

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BF_2 t1_iwuip1n wrote

(IANAL, but I've had to look into this myself.)

On the Federal level, you can basically gift anybody any amount of money -- or the equivalent in property -- but you have a lifetime limit (or something like that) before you pay taxes on the gift, AND you must report to the IRS any gifts >$15k (if it hasn't already been upped). The recipient pays not Federal tax on such gifts.

I have never heard of any equivalent issue in NJ Tax Law -- but IANAL. Consult a tax attorney, though a CPA might also be able to provide answers. (Don't trust ordinary tax preparers like H&R Block on such questions.)

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