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#1
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I am looking to buy a house with a downpayment of 20%. I only have 10%, however a parent wants to *give* me the other 10%.
Being a tax nobody, will someone explain to me the best way to go about this in regards to taxes? Wouldn't there be some kind of gift tax for the parent? If I've left any pertinent info out, please feel free to ask. Thanks |
#2
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The parent can gift you $12k each year tax free. Over that, they need to file a gift tax return. They do not necessarily have to pay taxes on any gift over that amount, it would just eat into their lifetime exemption.
One workaround is to have each parent gift you $12k for a total of $24k. Each person gets to gift $12k tax free annually. FYI, you need this gift to be on your bank statement for a few months before you close. The mortgage company might get spooked if they see a large deposit on your bank statement three weeks before closing. |
#3
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[ QUOTE ]
FYI, you need this gift to be on your bank statement for a few months before you close. The mortgage company might get spooked if they see a large deposit on your bank statement three weeks before closing. [/ QUOTE ] Not necessarily. I am in Atlanta also and bought a condo a few months ago where about half of the downpayment was gift funds. My loan officer said my credit was good enough so that no additional paperwork was necessary and the gift funds were deposited into my account a few days before closing. I did my loan with Suntrust because they offered me the best rate. |
#4
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[ QUOTE ]
The parent can gift you $12k each year tax free. Over that, they need to file a gift tax return. They do not necessarily have to pay taxes on any gift over that amount, it would just eat into their lifetime exemption. One workaround is to have each parent gift you $12k for a total of $24k. Each person gets to gift $12k tax free annually. [/ QUOTE ] Also, if you're married, each parent can give each of you $12k each, for $48k. And if you planned this 2 weeks ago, this could have been done on 12/31/06 and then again on 1/1/07. That would have been $96k. But I guess that's water under the bridge. |
#5
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well unfortunately, there is only one parent. So maybe I could do 12k before 12/31/07 and another 12k 1/1/08...that works right?
Will I have to declare these "gifts" on my tax return? |
#6
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AEKD, people receiving gifts are not subject to income taxes on those gifts. Doing two gifts on those dates would be fine.
To Scotch, that's why I said maybe regarding spooking a mortgage company. Some care, some do not. If OP is planning this far in advance, there is no need to risk scaring off a good rate by messing up the downpayment. |
#7
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If the gift is from a parent or other family member the lender often asks for a letter from them stating that it is a gift and not a loan. This is usually only needed if you have not already had the money in your accounts for 60+ days. You really just have to check with your specific lender though because they can have different policies.
Pancho |
#8
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[ QUOTE ]
there is no need to risk scaring off a good rate by messing up the downpayment. [/ QUOTE ] That'll be hard to do if he has good credit and 10% of his own cash to put down with the way the market is. Anyway, I wasn't trying to call you out, I was trying to clarify and give him specific info because I am in the same city. |
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