Gifting property ownership gradually

[mazman1381]

We'd like to gift my son $300,000 for a partial down payment on a house but don't want to go over the $17,000 per year gift tax exclusion. (He'll put in $200,000 of his own money.)  We would both be owners of the home with him making the mortgage payments.

Would we be able to gift him partial equity in the home of $10,000 each per year ($20,000) for 15 years and avoid gift tax reporting? 

[Holly W]

Hello @mazman1381 

Thank you for joining us today, we are so happy you are here!

I will answer the question with my understanding of the question.  I'm assuming when you say we would each gift him partial equity, I'm assuming you and your spouse.  With that understanding, the answer would be yes, you can each gift 17,000 per year or 34,000 per married couple and avoid gift taxation.  You can continue that year after year, there is not limit on how many years you can gift the same person, although the amounts may increase year after year.  Also, if your son is married, you could gift him the 17, 000 and his spouse 17,000, and any of their children.  
I hope this answers your questions!  Have a wonderful day!
Holly W

[Bsch4477]

If you are able to give the $300,000 at once don’t be put off by a one time filing of the gift tax form. Since the gift/estate tax exclusion is over 12 million dollars you won’t have to worry about paying gift tax in any event. 

[mazman1381]

Thanks for the reply. How would we go about documenting the annual gift of equity?

[Mike9241]

what @Bsch4477 suggets is probably the best option.  if you are part owners and he has to sell the part you own would not be eligible for the home sale exclusion. meaning part of any gain would be taxed to you.   in the worst case scenario if something were to happen to you while still owners there could be estate and inheritance issues.

[mazman1381]

My concern is that years from now the gift tax exclusion drops significantly. 

[JanetKT]

@mazman1381 

I do see that you have already received some replies but wanted to share the IRS link: https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritan...

I would agree that it would be easier to file a gift tax return for the whole amount upfront. Than to have it be done over several years. There may be advantages for homestead exemptions etc. to have the deed only in your sons name but that is a separate consideration.

Also if there is mortgage the bank may have stipulations on how the gift is documented. So there are several considerations on that topic as well please see this article: https://www.chase.com/personal/mortgage/education/financing-a-home/gift-money-for-down-payment

[Bsch4477]

The IRS has issued final regulations under IR-2019-189 that there will be no “clawback” for gifts made under the increased estate and gift tax lifetime exemption. This means that the IRS will not retroactively assess gift tax to any lifetime gifts in excess of the sunset exemption amount.

[JanetKT]

Hi yes that is one downfall so you just need to balance the risk. If you have a substantial estate it would be best to get advice from an estate planning expert to ensure that you are covered as their are ways to migrate any future risks.