This question is for those of you with any tax knowledge. My husband's and my income for our family of 4 is such that we usually receive a tax refund of all taxes taken out of paychecks plus earned income credit. However, we have no personal debt and an excellent credit rating so we were able to buy our first home. We did not have a down payment saved so our parents gave us a one time gift of $15,000.00 to use for the down payment and closing costs.
Add your voice! Click below to answer. ThriftyFun is powered by your wisdom!
Any gift of value more than 2000.00 has to be included on taxes, there is a special section on tax forms that will allow you to enter it as a gift . check out www.irs.gov and search for gifts
I know there is an exception for family giving family a one time gift, you should really check with an accountant, I think you will have to show that it was given, but it may not be taxed. Good Luck
Here's from the IRS website:
"Gift Taxes IRS Tax Tip 2006-14 If you gave any one person gifts in 2005 that valued at more than $11,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts. The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value. Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift. There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit: If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift. For more information, get the IRS Publication 950, Introduction to Estate and Gift Taxes, IRS Form 709 or 709-A, United States Gift Tax Return, and Instructions for Form 709. They are available at the IRS Web site at IRS.gov in the Forms and Publications section or by calling 1-800-TAX-FORM (1-800-829-3676)."
Tuition or Medical Expenses that you pay directly to an educational or medical institution for someone's benefit
Gifts to your Spouse
Gifts to a Political Organization for its use
Gifts to Charities
Because this rule is from 2005, the change I can see for 2006 is that you can give 12,000. It looks like your parents can deduct 12,000 of the 15,000 as a gift and you don't owe any taxes on their gift.
Please call the IRS to make sure. They are happy to answer questions. Because you will want to deduct your mortgage next year and may want to deduct the costs of closing at some point, I'd recommend itemizing your taxes.
Susan from ThriftyFun
The person receiving a gift never pays tax on it. The person giving a gift may have to file a gift tax return if it is over the yearly exclusion, but it rare that they would pay any tax as it simply reduces their life time credit.
From past expierence. My parents were able to "GIFT" each one of us (3) children $10,000.00 a piece each year. THEY had to pay the tax on the money, we children DID NOT. It was a GIFT. The amount has gone up in recent years. I believe it's $11,000.00 now, per year, per person . YOU, being the recipient, would not have to pay tax or report it as long as it's $10,000.00 or less.
IRS Tax Tip 2006-14
If you gave any one person gifts in 2005 that valued at more than $11,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts.
The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value
If you have two parents, or two of you, the $15,000 gift can be made tax-free to both parents and giftees. The other part of your question...you don't have to itemize unless you want to, which you would only do if it will reduce your taxes. Even the first year I bought my house, I didn't have enough deductions, including the interest, to make itemizing worthwhile. I've done the calculation for several others, some then itemize, some don't, but there is no IRS rule that says you have to itemize. Congrats on buying your first house!
Actually, it's per individual -- so the mother can give the son $7500 and the father can give the D-i-L $7500 and no one is over the limit on their tax. $12,000 per person per year ... $2 million lifetime as of 2006.
Add your voice! Click below to answer. ThriftyFun is powered by your wisdom!
