wscain
New Member

Do my parents pay any taxes on a gift of equity for a house I am buying from them for less than the appraised amount?

My parents are selling me a house they just bought a little over a year ago for the same price they bought it for ($189,000); I've been renting the house from them since they bought it and am currently live in in it.  The house has been appraised at $225,000 and the bank I am working with has suggested that my parents provide me with a gift of equity for the difference between the appraised value ($225,000) and what they are making me pay ($189,000), which comes to a $36,000 gift of equity.  If we go through with this, will my parents have to pay taxes on the gift of equity they provided me?  I've researched this some and I feel like they won't have to, but I dont' know if I interpreted what I read correctly.  As of right now, my understanding is that $14,000 of the gift of equity won't have to be reported at all and the remaining $22,000 will have to be reported on Form 709 and will be counted towards a lifetime gift allowance and not taxed as well.