My husband and I purchased a home with our daughter last year. All 3 of our names are on the deed and on the mortgage. My daughter lives in the home. My husband and I paid the down payment at time of purchase and we pay the mortgage. Are we required to file a gift tax form since we paid the full amount of the down payment, and if so, how much is the "gift"? Is it 1/3 of the down payment since there are 3 owners? Is it 1/3 of the purchase price of the home? And if we pay the home off early in a few years, would we then be required to file a gift tax form for 1/3 the pay-off amount (assuming my husband and I pay off the mortgage and my daughter does not contribute)?
You will have to file a 709 gift tax return for the amount of the down payment and also for the total amount of mortgage payments you make each year. You'll have to file a 709 if and when you pay off the mortgage balance if it's over the annual exclusion amount.
If you and your husband gave a gift of greater than $17k each, then you would be required to file a gift tax return (Form 709). Although the return is required if over that amount, the gift tax only kicks in after lifetime gifts exceed $12.92 million in 2023.
Thank you for your response. I read the 709 instructions and I do understand that we have to file the form since our gift was larger than the $34,000 annual exclusion (total for my husband and I). What we are trying to determine is how much the gift total is. Since my husband and I are owners of the property along with our daughter, is our "gift" to her 1/3 of the down payment that was due at closing? And the poster above mentioned including the mortgage payments (that were paid by my husband and I) in the total amount along with the down payment. Would we include 1/3 of the mortgage payment each month? Just principal or principal and interest?
Thanks for your help!
If both you and your husband are on title and there are three owners..........you, your husband and your daughter.....then the gift would be the 1/3 for the purchase price you paid for her share and the mortgage payments........principal and interest.
Thank you! And, yes, all 3 of us (myself, my husband and my daughter) are on the title. And just to clarify, since the home was purchased last year, the gift amount is 1/3 of the amount of the down payment at closing (purchase price minus the mortgage) plus 1/3 of the monthly mortgage payments that were made last year?
Yes, that is how I understand it. Your gift is her 1/3 share of the down payment, plus her 1/3 share of the mortgage payments (principal and interest portion).
You haven't gifted her 1/3 of the mortgage amount yet because that amount hasn't been paid yet.
Because you're on the deed and mortgage it does not appear you need to do a "Gift Tax" return for your daughter...you're obligated to pay a debt and have an interest in real-property yourself...you pooled resources to buy something you participate in equally. There are a few details missing from the story: How much did you put toward the down-payment? Does she pay less than 1/3 the mortgage? How much is the mortgage monthly? What happens if you and your hubby move out/pass away? Is it Tenants in Common or JT With Rights of Survivorship or Life Estate for Mom and Dad in Daughter's name 100%...But I'm very comfortable asserting this is a "No Gift" situation.
I misread one piece...you're on the deed and mortgage, but you don't occupy the house, it is a house just for her and you're paying the entire monthly note? Good deal for her...that may be a gift event...however, I still think the fact that you have a debt obligation and ownership may eliminate the gift tax implications. She can't sell the house on her own and walk away with the proceeds...it isn't 'just her house outright'
For a gift to be a gift, the recipient has to have unfettered control of the asset. In this case, she does not.
My husband and I treat it as a second home/vacation home. Once he retires, we plan to spend more time there. My daughter does currently live there. My husband and I pay the monthly mortgage payments. She does not contribute to the mortgage, but she pays other bills (utilities, HOA fees, property taxes, insurance). The mortgage is about $1400/month and the down payment (paid entirely by husband and I) was a little over $200,000. It is currently set up as JT with Rights of Survivorship.
We are getting conflicting answers on whether the gift tax form is required. We were told that once we pay off the mortgage, if she were to transfer her 1/3 back to us (if she should move out, if we want to put the property in a trust, etc), that she would be required to fill out the gift tax form since she would be gifting her 1/3 back to us. This is what got us wondering if we needed to file the gift tax form for the purchase since we have contributed all funds towards real estate that we jointly own with her.
It was not an IRS gift when she lived in your first home; same with her living in your second home. If you take your name off the deed, transferring the property into her name, that will be a gift. Ask again then.
If you take your name off the deed, transferring the property into her name, that will be a gift.
It's a completed gift since the parents paid the daughter's share and technically the daughter has a 1/3 interest which she could sever at any time and sell........sue to partition.
I'm getting more comfortable with my "No Gift" diagnosis...you paid $200,000 to a mortgage company, right? Please confirm that you did not give your daughter $200k to give to the mortgage company. Moreover, she cannot sell her 1/3rd separate from you, the parents everyone is on the hook for the debt in a shared debt situation. If you parents die together in a plane crash, she is responsible for a debt. Moreover, if she moves out under the cover of darkness one night - you and your hubby on on the hook for a debt. I think about this like the 3 of you bought a rental property that she happens to partially own and occupies as renter. If y'all wanted to get really fancy about it you could even have a lease where she pays you $1400 per month (less than $17,000 per year) and all three of you be depreciating the property.
Please confirm that you did not give your daughter $200k to give to the mortgage company.
The mortgage company doesn't get the money, the seller(s) of the property do.
she cannot sell her 1/3rd separate from you
She can sue to partition and sell her 1/3 share.
If you parents die together in a plane crash, she is responsible for a debt.
Nope, not personally responsible since she didn't sign the note. The mortgage lender can foreclose on the property though.
if she moves out under the cover of darkness one night - you and your hubby on on the hook for a debt.
They are anyway since they signed the note. You do know that a mortgage consists of a note that is a personal promise to repay combined with a lien against the property right?
If y'all wanted to get really fancy about it you could even have a lease where she pays you $1400 per month (less than $17,000 per year) and all three of you be depreciating the property.
Yeah, that's is definitely NOT a possibility given these facts.
Are you saying it's a completed gift right now or it would be a completed gift if we were to take our names off the deed and transfer our 2/3 of the property to my daughter? And if it is not considered a completed gift right now, do we still have to file the 709 and claim that the down payment and mortgage payments we made towards the purchase of the property are a gift?
Also she did sign the mortgage note (I noticed down below that you said she did not)...all 3 of us are on the deed and on the mortgage if that makes any difference in terms of this being a gift.
Sorry for all the questions...we are confused and trying to learn as much as we can!
Correct...we did not give any money directly to our daughter when we purchased the home. The down payment was given to the title company (or whoever did the closing) and all mortgage payments have been paid directly to the lender by us.
Your daughter got an undivided 1/3 interest in the property and she paid nothing. If she's personally obligated on the mortgage and you're paying it then that's part of the gift as well. So, the gift would be 1/3 of the $200k down payment plus her share of the mortgage that you are paying.
Another person in this thread is confused.....this is not the same as, say, a joint bank account where one person deposits all of the funds and there is no gift until the other joint owner withdraws some or all of the funds in the account. Your daughter has 1/3 ownership which is irrevocable since she's on title and that has value immediately.
Good morning - this is an interesting thread. In part because it has two phases, a mortgage down-payment that has been made and an ongoing monthly payment. It sounds as though everything has been done with/thru the mortgage company and sellers...no money changed hands directly from parents to children. (not a gift) Your child is living in a house she doesn't pay for (a gift). But if something happened to you & your hubby, she would bear the full financial obligation of the mortgage (not a gift). She is on the loan (not a gift) She didn't contribute to the down payment (a gift) but she also didn't receive the down-payment, it went straight to a third party (not a gift.) You and your husband participate in owning the home (not a gift, it is mostly your property). She has a share of ownership (a gift) but the value of that ownership is questionable (suppose she sued for severance and tried to sell 30% of a primary residence...any interest buyers?...nope...not a gift as it doesn't have marketable value - the house isn't owned in an LLC or S-Corp with marketable fractional ownership.) She doesn't participate in the mortgage payments (a gift) but the Annual gifting limit of 2 living parents to a child is $17,000 in 2023 and $18k in 2024 Per Giver...so mom and dad can give a total of $36,000 to daughter this year...if mortgage plus HOA is less than $34k in 2023 then no gift tax reportable. Based on the numbers in the thread...$200k down and $1400 per month I'm guessing the house is in the $400k-$500k ballpark? So, what is a completed gift? It is when the recipient has full-control of the asset. Technically, she doesn't. When the asset has no liens for which she is personally responsible. She does have debts and liens, she is on the mortgage. My very first impulse put me on team "Gift" but then I thought it through in detail and switched to "Team No Gift" for the following reasons: daughter doesn't have anything of value she can sell free & clear, daughter didn't receive funds for down-payment, monthly payments are less than reportable gift tax. Additionally, daughter does have liability for a debt should Parents be unable to make payments. It ultimately comes down to how aggressive/conservative you want to be...is your net-worth over the existing estate tax exemption of $13.6 MM? If so, perhaps you want to be more conservative and file a Gift Tax Return "just because." But I think a gift tax return would be more paperwork than actual progress in this instance.
no money changed hands directly from parents to children. (not a gift)
Yeah, but that is NOT the test as to whether a gift was made or not. In this case a gift was made.
So, what is a completed gift? It is when the recipient has full-control of the asset.
Correct and the daughter has full control of her 1/3 interest in the property.
No offense but you're really lost here and need to stop posting information that is a product of your misunderstanding and misapprehension of the law relating to taxes and gifts.
Currently form 709 is not in Turbotax 2023. Where do I see a 709 sample form filled for giving $270000 to my adult son in 2023.
Gspear
TurboTax does not include Form 709 because that form is not ever part of an income tax return. It is a separate tax form that must be filed all on its own.
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 ($17,000 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. In 2024 that yearly limit will increase to $18,000.
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