Gift Tax on a Refinance

[sarar0se]

Hi everyone,

My dad owns a rental property. We added my name to the title as joint tenants. 6 months later,  I refinance the property and remove my dad from title. The new loan is only in my name thus I am the only one on title. I only refinanced 75% of the appraised value of the property since the lender would only allow up to 75% due to it not being my primary home. Would this be considered a gift from my dad to me, even though I was on title?

Thanks!

[NCperson]

Yes , it is a gift since the EQUITY in the property transferred from your father to you

I imagine if we were to get technical, half the equity was a gift to you when your name was added to the title and the other half of the equity was a gift to you when his name was removed from the title

Note I am focused on the equity and not the value of the house or the debt so the “equity” could be different at the two points that the ownership was changed

But there is no “tax” on the gift just a reporting requirement on Form 709.... and if the equity transferred is less than $15000, then there is no reporting requirement either (and if the two steps occurred in two different years, then no reporting if the equity transfer was less than $30000)

[sarar0se]

So my dad would file the Form 709 but I wouldn't have to file anything?

[NCperson]

Correct; it is his responsibility

All it really does is when he passes, his estate is entitled to pass $5.6mm tax free ($11.2mm through 2025 only) and that number is reduced by anything that was reported on the Form709 during his life, so for most people it really never makes a difference

[sarar0se]

Gotcha. Thank you so much for your help! Appreciate it greatly! Have a great day!