How are IRS taxes charged when there are more than one person on title such as my wife, myself and two adult children?

[gcduri]

My wife and I file for taxes jointly. We are 77 and 73 years old.

I own my house as a sole owner. I am refinancing and I am adding my wife to Title of a single family house.

I want to add my two adult children (31 and 33) to Title, so they will be able to inherit the house and avoid sale taxes (I assume it would work this way -- am I correct?).

But how would IRS taxes be charged each year, before my wife and I die?

Can I keep paying taxes on my house, as before, or am I creating tax issues for my children?

[Critter · Accepted solution]

I want to add my two adult children (31 and 33) to Title, so they will be able to inherit the house and avoid sale taxes (I assume it would work this way -- am I correct?).   

Do NOT do this ... it is a bad idea. First they will not inherit the property since they will already be owners since you gifted them part of the property at your cost so they will not get the stepped up basis on the entire home.  And if they are ever sued or file bankruptcy then your home could be taken.  A better idea is to put home in a revocable trust to avoid probate & get the stepped up basis at death. 

Seek help to do some tax/estate planning since there are also medicare rules to take into consideration.

[gcduri]

What do you mean by "stepped up basis at death"?

[SweetieJean]

<a rel="nofollow" target="_blank" href="https://www.thebalance.com/adding-children-to-deed-3505418">https://www.thebalance.com/adding-childr...>

[VolvoGirl]

The value on the date of death.  See, if you add them to the title now then when they eventually sell it they have to use your cost.  If they inherit it they get a new cost basis at death.

 So if you paid 50,000 and they sell for 200,000 the taxable gain would be 150,000
But if it was worth 150,000 when you die then their gain is only 50,000

[gcduri]

Many thanks!