selling a home

[vthompson]

I married in 2024. My husband and I are selling our individual homes and plan to purchase a home together in 2025. 

1. The estimated equity from my home sale will be 100% invested in the new home purchase in 2025
2. The estimated equity from my husbands' sale will be 50% invested in the new home purchase in 2025. My husband intends on gifting the remaining 50% to his 2 adult children. 

Here are my questions:

1. Will we have to pay capital gains tax on the 50% equity (~$200k) my husband is gifting his adult children?
2. Will my husbands' 2 adult children have to pay any taxes on the gift estimated at $100k each? 

Thanks

[xmasbaby0]

Gifts given to family members, friends or other individuals are not deductible.   Gifts received are not taxable to the person who received the gift, and are not entered on a tax return.

If your gift exceeds the yearly limit ($18,000 per individual)  imposed by the gift tax rules, then you will need to complete a Form 709 gift tax form and send it to the IRS, although it is very unlikely that you will owe any tax.

TurboTax does not support Form 709.  It is not an income tax form and would not be included as part of an income tax return.

Here is a link to the form:

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

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

[xmasbaby0]

Buying another home with the proceeds of the "old" home has been irrelevant since the tax law changed in 1997.  

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

• If you are using online TT, you need Premium software to report the 1099-S

[DoninGA · Accepted solution]

Will we have to pay capital gains tax on the 50% equity (~$200k) my husband is gifting his adult children?  Yes

Will my husbands' 2 adult children have to pay any taxes on the gift estimated at $100k each? No and they do not report the gift received on a tax return, regardless of the amount received.

He will have to file a Form 709 reporting the gifts given to each individual since the amount of the gift is greater than $18,000.  He will not have to pay any gift taxes if his total gifts ever given is less than $13.61 million.

The Form 709 is separate from a tax return and is mailed to the IRS using the address in the Form 709 instructions.

TurboTax does not support IRS Form 709

IRS website for Form 709 - https://www.irs.gov/forms-pubs/about-form-709