Gift Taxes & Real Estate

What if someone wants to give a house (real estate) worth $459,900 to his aunt but doesn’t want to pay gift taxes on it. 

There are no gift taxes until the total amount you give exceeds $1 million.  So the giver shouldn’t have to pay any tax on that gift.  If your gift is $13,000 or less per year, there is no tax consequence to anyone.

If the gift is over $13k per year to any one person, that amount is deducted from the giftor’s lifetime gift tax applicable credit amount, which remains at $1 million.

When dealing with gifts of real estate, the tax basis of the donor (the person giving the gift) becomes the tax basis of the donee. 

Example:  If you bought a house years ago for $25,000, and gift it to a nephew, even if the property is now worth $1 million, the nephew’s basis should be the same as yours (which is $25,000). 

If you made no improvements to the property (which would have increased tax basis), if the nephew sells the house for $1 million, he would owe the IRS $146,250 in capital gains tax.  ($1 million minus $25,000 x 15 percent).  He would also owe any local or state taxes.

__________________

This is not the providing of tax or legal services.  You should always consult with a lawyer or certified public accountant about your own estate planning and income tax situation and plans about gifting your property.

Leave a Reply