Gift tax on down payment

[pprabhakar]

My husband and I are planning on buying our first home, and my parents will be supporting us by depositing the down payment funds (150k) into a joint account that we all have. My question is I understand the annualized tax exemption of 30k for couples for gifts, and that the recipients incur no tax on the gift, but will the down payment be eligible for deduction on the lifetime gift tax exemption for my parents? To the best of my knowledge they have never filed any deductions for the lifetime exemption, so if they were to file the exemption and fill out the appropriate form, would the gift still be tax free? 

[Anonymous_ · Accepted solution]

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@pprabhakar wrote:

....if they were to file the exemption and fill out the appropriate form, would the gift still be tax free? 

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The lifetime exemption amount for 2020 is $11.58 million (per person) so the gift will be tax free.

Your parents will have to file Form 709, however, and they should probably get professional guidance.

See https://www.irs.gov/pub/irs-pdf/f709.pdf

[Carl]

YOu as the gift recipient have no reporting requirement.

The reporting requirement is on the giver of the gift, if the value of that gift exceeds $15K in a tax year to any one person. ($30K total for both of you.)

The giver of the gift files the IRS Form 709 -Gift Tax Return. Understand that since the value of the gift is less than $11 million and more than $30K (more than $15K to each of you) while the giver is required to report the gift, they will not pay one single penny of tax on it. They already paid "regular" taxes on that money before they gave it to you.

So while there is a reporting requirement, no additional taxes will be paid.