This will be reported as a sale of your home on your individual income tax return. And a gift tax return will be required as well.
On the individual return for you the cost basis will be what you paid for the house and the selling price will be $(unknown without more information). The gift of equity can be listed as a sales expense. All other items on the settlement statement will be used on each return, such as prorated real estate taxes, and mortgage interest.
Your daughter as the buyer may have points, if she can deduct those in the year of purchase as well.
Since the gift of equity is greater than $15,000 ($30,000 if you are married and able to use 'gift splitting') a gift tax return may need to be filed for you. This answer must be determined by consulting someone who specializes in gift tax returns.
As indicated by our awesome Tax Champ @jtax there are other details that are important that you understand.
Once the actual selling price is known then there is a partial sale and partial gift. It is two separate transactions.
- A sale of the home for you, the seller
- A gift of the equity to your daughter
You will not owe a gift tax unless your lifetime giving exceeds $11.7 million for 2021. However, if your gift to an individual during the the year exceeds $15,000 (unless gift splitting is involved) you have to report the gift by filing a gift tax return, Form 709.
You might consider contacting a gift tax expert.
@MickieDBaca
[Edited: 03/05/2022 | 12:33p PST]
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