Purchase House with Child

[pw7]

I am going to purchase a townhouse with my daughter.  She has to be on the title because the HOA requires the approval of non-owner residents.  We are titling it as Joint owners with the right of survivorship.  My daughter is not contributing to the down payment.  If I mortgage the property is my gift amount to my daughter deemed to be based on the 20% down payment or based on the full value of the house.  I was not planning to put my daughter on the mortgage but am not sure if I need to do that to avoid her getting a gift for 1/3 of the full value of the house.

[Anonymous_]

Your gift to your daughter would be the equity you have in the house (i.e., purchase price less mortgage balance).

Is there an issue with getting her approved by the HOA? Does the HOA make it a practice of not approving non-owner residents?

[Carl]

She has to be on the title because the HOA requires the approval of non-owner residents.

I'm just curious here, because there's an aspect I obviously don't understand.  What does "approval of non-owner resident" have to do with your daughter being on the title? If she's on the title, then "approval of NON-OWNER resident" seems like a mute point, since she would be an owner.

I would think that if your daughter is the one who will be living there and not you, it would be much simpler to just gift her the down payment and only your daughter needs to be on the title, and only your daughter needs to be on the mortgage.

Now in gifting the down payment, the lender will most likely require documentation from you verifing that the down payment is in fact, a gift and further stating and verifying that the recipient of the gift has no obligation to pay it back.

to avoid her getting a gift for 1/3 of the full value of the house.

Why? Are you "in fact" obligating her to pay you back for the down payment maybe? If not, then could you be of the mistaken belief that a tax of some sort has to be paid on a gift?  While there is a reporting requirement for the giver of any gift given in a tax year that exceeds $15K, there is no tax assessed so long as the value of the gift is less than $11.4M.

[pw7]

Thanks for the responses.  I am buying the house for my daughter to use as she is just starting out and cannot afford a mortgage.   I would just purchase the home on my own but I am putting her on the title because she is living there not me. 

As far as the gift tax I thought that gifts over $15k required I thought I had to pay a gift tax but as I looked into it it looks like I just have to file the gift tax return and it counts toward my $11M lifetime exclusion.  Is that correct?  So there is no tax owed just a filing requirement?

[Anonymous_]

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@pw7 wrote:

........I just have to file the gift tax return and it counts toward my $11M lifetime exclusion.  Is that correct?  So there is no tax owed just a filing requirement?

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Exactly. There is no gift tax owed until you surpass the lifetime exemption; only a filing requirement if the gift exceeds $15,000 from you to any one individual.

[Rick19744]

As a follow-up, the current amount of $11.7 gift tax exemption is very likely to change effective 1/1/2022.

Since the only bill at this time is in the Senate, the exemption amount there is approximately $6 mil.

All tax legislation must begin in the House and any differences between a House bill and Senate bill is then reconciled in Joint Conference.  As of this response, we are not anywhere near understanding what the exemption amount will be.  However, most likely, the exemption amount will suffice for most taxpayers; meaning no gift / estate tax at the federal level.  Keep in mind, that states have differing rules so it is best you look into your particular state treatment as well.

[TomD8]

The only two states that currently impose a gift tax are Connecticut and Minnesota.

[Anonymous_]

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@TomD8 wrote:

The only two states that currently impose a gift tax are Connecticut and Minnesota.

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Minnesota repealed its gift tax in 2014.

See https://www.revenue.state.mn.us/gift-tax

[TomD8]

@Anonymous_ -- Grazie.