My parents have graciously offered to pay off the balance ($100K) of my mortgage, do either of us have to report that on our tax returns?

[DoninGA · Accepted solution]

If this is a gift to you, not requiring repayment of the funds received, then you do not report the gift received from an individual on your tax return, regardless of the amount received.

The individual giving the gift must report the gift given if over $14,000 using IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.  If the individual has not given gifts totaling over $5.45 million in their lifetime there will be no gift taxes owed.

TurboTax does not support IRS Form 709.

IRS Form 709 - https://www.irs.gov/pub/irs-pdf/f709.pdf

IRS Form 709 instructions - https://www.irs.gov/pub/irs-pdf/i709.pdf

[msant]

Does it matter if my parents send a check to my mortgage company or give me a check to deposit and I pay the mortgage company?

[DoninGA]

Not sure...Let me ask one of our experts.
@TaxGuyBill - Payoff of a mortgage by parents, would that also be considered a gift requiring a Form 709?

[TomD8]

Not @TaxGuyBill, but I think this is the answer:

The issue isn't how the mortgagee receives the money.  The issue is whether or not the parents receive anything for their $100K.  The IRS defines a gift as a transfer of property (including money) by one individual to another, while receiving nothing, or less than full value, in return.  <a rel="nofollow" target="_blank" href="https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax">https://www.irs.gov/business...>
Therefore, if the parents are receiving nothing for their $100K, they have a reportable gift.  Also, the $14K exclusion applies to each of the parents individually.  They can thus give a combined gift of $28K without having a reporting requirement.
The gift amount over $14K (or $28K) will count against the parents' lifetime unified credit - currently $5.49 million (2017) - so it's very probable they won't actually have to pay any gift tax, although they do have to report it.

[TaxGuyBill]

I agree.  Although payments direction to a school or medical institution can avoid filing the Gift Tax return, any other gift, either directly or indirectly, would required a Gift Tax return.

To add one more thought to Tom's comment, in the event the OP is married, then each parent could give both you and your spouse separate $14,000 gifts ($15,000 starting in 2018), resulting in a total of $56,000 before a Gift Tax return would be due.

But as Don and Tom said, although a Gift Tax return would be required, no actual tax would be owed.

In the event they want to avoid filing the Gift Tax return, another option would be for them to give you $14,000 (or $28,000 or $56,000, depending on the circumstances) this year, and then continue to give you gifts over the next few years until the mortgage is paid off.

[msant]

Thank you for all the comments, one last question.  Is the gift tax return available through Turbotax?

[DoninGA]

The Form 709 is not supported by or available from TurboTax.  The IRS links in the answer above are for the form 709.

[macuser_22]

No, the gift tax return is not an income tax form so it is not in TurboTax.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f709.pdf">https://www.irs.gov/pub/irs-pdf/f709.pdf</a>
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i709.pdf">https://www.irs.gov/pub/irs-pdf/i709.pdf</a>

Also, keep in mind that if paying off the mortgage includes tax deductible interest and your parents pay it directly then unless their name is on the mortgage, they cannot deduct it since they are not legally obligated to pay it and you cannot deduct it because you did not pay it.    If they give the money to you and you pay the mortgage then  it was you that paid it with your money.

Either way it is a gift from your parents, but once the money is given to you, you can do anything you want with it including paying the mortgage, then the mortgage payment would all be in your name.   Having your parents pay it directly could also affect your credit score since the mortgage would not report to the credit agencies that you paid the mortgage.

[tmcdonald59]

If your mortgage was paid off why would it matter who paid it off in regard to the mortgage company reporting to the credit reporting agencies that your mortgage account was paid off?

[tagteam]

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@tmcdonald59 wrote:

If your mortgage was paid off why would it matter who paid it off in regard to the mortgage company reporting to the credit reporting agencies that your mortgage account was paid off?

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It would not matter to the agencies who paid off the mortgage; the impact would be the same regardless of who paid off the mortgage. 

This thread primarily relates to the nature of a mortgage payoff that would be considered a gift to the mortgagor (the actual borrower), whether the donor pays the lender directly or gives funds to the borrower to allow the borrower to pay off the mortgage.

[degree01]

Hello, I owe 27000. on my home and My Father in Law wants to give me a gift to pay it off, can he give me and my wife each 13,500 without him having to pay taxes? and if so, is there something we have to fill out for receiving that money?

thank you in advance.

[xmasbaby0]

The recipient of a gift does not report the gift on their tax return.   If your FIL gives each of you less than the $15,000 per individual amount, then he does not have to fie a Form 709 gift form.

GIFTS

Money that you receive as a gift is not taxable income to you, and you do not need to report it on your income tax return.  Money that you gave as a gift to someone else is not deductible for your taxes.

Turbo Tax does not support the gift tax form 709, but here is a link:

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

https://turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N

https://www.forbes.com/sites/ashleaebeling/2017/10/19/irs-announces-2018-estate-and-gift-tax-limits-...

[shzh6688]

Re: Will the amount matter? This guy may receive $100K from his parents to pay his mortgage. How about $1million? Will this guy or his parents have to pay tax if his parents help him to pay $1million for his mortgage?

[xmasbaby0]

@shzh6688 Did you even read the reply directly above your question?   Here is it again:

GIFTS

Money that you receive as a gift is not taxable income to you, and you do not need to report it on your income tax return.  Money that you gave as a gift to someone else is not deductible for your taxes.

Turbo Tax does not support the gift tax form 709, but here is a link:

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

https://turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N

https://www.forbes.com/sites/ashleaebeling/2017/10/19/irs-announces-2018-estate-and-gift-tax-limits-...