Lending/Gifting $ for daughter's house down pmt?

[gerntz]

I'm repeating a few things but maybe saying them in a different way will be helpful...

You and your spouse can both gift each person (daughter and son-in-law) $15,000 in 2020 without any tax consequences.

You: $15,000 to daughter + $15,000 to SIL = $30,000

Spouse: $15,000 to daughter + $15,000 to SIL = $30,000

Total: $60,000 If that's not enough you can do the same on January 1, 2021.

The mortgage company may very well look back to see you gave the money. You and your spouse will then have to provide a letter indicating the money is a gift with no strings attached. Back in the day, mortgage companies only looked back 3 - 6 months. I realize you're not trying to hide anything but giving the money sooner rather than waiting until nearer to the closing date may make things easier.

Do not give a "gift" with any expectation that it will be returned. If you expect it to be returned then it's not a gift.

If you want to make a loan, that's fine and the recommended method is to record it properly, along with the proper terms (interest rate, payments, due date, etc.). The IRS establishes guidelines for interest rates. For instance you cannot make a proper loan with a 0% interest rate or an interest rate that is dramatically lower (or higher) than rates established by the IRS. The idea of a life insurance policy that would pay off the loan is a good thought, but it may not be needed provided the loan is recorded in the county of record against the property. You will be an official lien holder and will be paid back. However, the life insurance would give you some "belts & suspenders" as the British sometimes say.

As long as your assets are less than $11M & you expect them to stay below that, you can give them everything you have at anytime. Just need to fill out the Fed Give Tax Return for amounts over $15K/yr/person, but there will be no tax. The $15K limit just avoids the Tax Form.

 

[mpkcapt]

Technically, If I gift my son any amount of money(+ or - the $15k). Doesnt he still have to pay income taxes on it ??

 

[cathy63]

Technically, If I gift my son any amount of money(+ or - the $15k). Doesnt he still have to pay income taxes on it ??

No! Gifts are not income for the recipient. You can give him any amount you want and he will not have to pay tax or report anything to the IRS. You just have to file a gift tax return for any gift over $15K, but you will not owe any tax until the cumulative gifts exceed $11.4M.

 

[Sunset]

No! Gifts are not income for the recipient. You can give him any amount you want and he will not have to pay tax or report anything to the IRS. You just have to file a gift tax return for any gift over $15K, but you will not owe any tax until the cumulative gifts exceed $11.4M.

+1

Said perfectly, anybody can give me $11,000,000 and they won't pay tax, and I won't pay tax. They just have to fill out a form to say they did it, but no tax.
I'll wait while interested folks get a pen .....

 

[Sunset]

I'm repeating a few things but maybe saying them in a different way will be helpful...

You and your spouse can both gift each person (daughter and son-in-law) $15,000 in 2020 without any tax consequences.

....

Anybody can give anyone $11,000,000 That's 11 Million Dollars without any tax consequences for giver or receiver.

The $15,000 limit is simply there so the giver does not have to fill out a (non-taxable) report to the IRS.

 

[donheff]

Anybody can give anyone $11,000,000 That's 11 Million Dollars without any tax consequences for giver or receiver.

The $15,000 limit is simply there so the giver does not have to fill out a (non-taxable) report to the IRS.

The $15K per year per giftee also doesn't count against the $11M lifetime limit. So you can give all of your kids and grandkids $15k ea every year and still have $11M pass tax free at death. Not something I'm going to need to worry about.

 

[pb4uski]

It is amazing to me the lack of understanding of the gifting rules... especially when they are all readily available on the internet.

https://lmgtfy.com/?q=gifting+rules+2020

 

[athena53]

DS bought his first house in a LCOL area without our help- his Aunt had put aside money for his education and while we used it to pay half of his college costs, we paid the other half and the amount left over (it was UGMA, not 529) went for a down payment.

Eight years later he'd married, they had 2 kids and wanted a 3rd. House was getting crowded. They found a bigger place they loved and DS asked me if I'd give or loan them $7-$10,000 to keep the monthly payments at the same level. He'd done a good job of working through the numbers and he'd been very responsible with the other house, so we just gave him $10,000. I don't remember having to sign a gift letter.

I bought my first house with a friend and we borrowed $2K from his sister and BIL. (This was 1978.) They write it up as a secodn mortgage- I was fine with that and even though the relationship with the friend foundered I paid the second mortgage off a bit early.

One horror story from my family: My Uncle (Mom's brother) and Aunt borrowed $$ from Grandma and Grandpa for their first house with the understanding that they'd pay it back when they sold the house. In the meantime Grandma died and Grandpa remarried. Step-Grandma, who was a real piece of work, found out about the loan and nagged Grandpa till he got Uncle and Aunt to pay it back even though they were still in the house.

 

[Sunset]

It is amazing to me the lack of understanding of the gifting rules... especially when they are all readily available on the internet.
....https://lmgtfy.com/?q=gifting+rules+2020

+1
Exactly what I was thinking.
Now I'll admit to be lazy and not being precise to the penny about the rules, but I figure if one is going to give away a few million dollars, they can find out the precise number.