I did not buy a home, but I was gifted a home. Do I need to report this on my taxes? If yes, then how?

[shyahjohnson517]

The "life changes" question asks if I bought a home, but no money was exchanged. A dying family member transferred the deed to their house to me, after I had been living in the home with them for five years. I did not purchase the property, so my answer to "did you buy a home" is no. Do I need to report the deed transfer somewhere else while filing my taxes?

[Mike9241]

it would seem to be a gift. I'm sure the value is in excess of the annual exclusion. therefore, the donor needs to file form 709. there are no income tax consequences to you, but you need to know the donor's basis and Fair value on the date of the gift.  these items become important if you sell or gift the property to others. 

at this time you have nothing to report except possibly property taxes that you paid if you itemize.   hopefully, there was no mortgage, because outside of the income tax laws, most mortgages contain a due-on-sale clause. you would need to check with a lawyer as to whether the transfer of title constitutes a sale. 

[Opus 17]

The only thing you really need to know for now is that you can only deduct property taxes and mortgage interest (if there is a mortgage) beginning on the date you owned the home.  For example, if you live in a state where property taxes are paid in arrears, you might get a bill in January 2023 that covers the 2022 tax year.  Even if you pay the entire property tax bill, you can only deduct the portion that corresponds to the number of days you owned the home in 2022. 

You also need to document the prior owners adjusted cost basis.  This is whatever they paid for the home, plus the cost of any permanent improvements, like a new roof, furnace, remodeling, and so on.  (Minor repairs don't count.)  When you sell the home, the capital gains tax you might owe will depend on being able to prove the cost basis, so don't be shy about asking for copies of documents and bills for improvements.  

In turbotax, it's fine to say you bought a home, just report whatever deductible items you have (probably only property tax) and leave the rest zero or blank (mortgage, closing costs, etc.).  You don't actually report the acquisition of a home on any tax return, Turbotax just asks so it knows to ask you certain questions instead of making you look for them.  

[fanfare]

"A dying family member transferred the deed to their house to me"

determine for your records the fair market value when this happened.

[Opus 17]

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@fanfare wrote:

"A dying family member transferred the deed to their house to me"

determine for your records the fair market value when this happened.

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This adds a complication and an opportunity.

If there was a "life estate" (written down or implied by the circumstances) then the price you will use to determine your capital gains when you sell is the fair market value on the date of the previous owner's death, rather than the previous owner's original cost.  I can't tell if you have an implied life estate, you would have to consult with an attorney.  But, it would be a good idea to get a real estate professional to prepare an official appraisal.  It will cost money now but could save you a considerable amount of taxes in the future.  

**To simplify, a life estate means the person gives you the house on the condition that they can stay in the house until they die and you can't sell or force them out.  In this case, whenever you sell the house, you are taxed as if you inherited the house instead of were given the house.  So you need to know the market value when the previous owned died to pay the lowest tax, if and when you sell.

A life estate can be written in the deed, or it can be implied by the circumstances.  But you may want legal advice on how to document those circumstances.