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Know federal and state tax implications of giving money to help your kids buy a home

(Michael Nagle/BLOOMBERG)
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I read your article on gifting money to kids to help buy a home. In your article, as in many others, it always appears as if there is some taxable issue if you give over $14,000 per person per year.

This is rarely an issue with the vast majority of households, as the gift amount that could turn into a taxable event is more like a million a year and it just counts against your estate when you die if your estate is over $5 million.

Filing the tax form is no big deal. It does not mean you pay taxes, just that the form must be filed. Most people don’t have a $5 million estate. Your article, as well as almost all others, is misleading folks as to the issue. I gave $220,000 to one son last year and $112,000 to another this year. It was no big deal.

Thanks for your comment. We agree with you that most people won’t run up against a problem because they don’t have a $5 million estate. Most don’t even have a $1 million estate. But because it’s the law, and it’s how the IRS rules are written, we share them that way. But certainly there is room to add a line about how, for most people, this won’t be a problem.

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We certainly want to make sure that people are aware that giving $14,000 or less to a person per year causes no tax issues for the person giving the gift. The person won’t have to file any paperwork with the IRS and the person won’t have any tax issues from the gift. From the IRS point of view, the gifting of $14,000 or less per year is no different than if you give someone $10.

When the numbers get as large as yours, we hope that the gift giver has sufficient knowledge to know how to fill out and file the forms required by the IRS and understand that they can give away up to $5 million without creating IRS issues.

Now, in some states, the gift tax rules differ and giving large gifts could trigger state income taxes at numbers far below the $5 million. For this reason, we always tell our readers to make sure they talk to an accountant or estate planner to understand the issues raised by giving large sums away to family members and others.

Thanks for your comment.

Ilyce Glink is the creator of an 18-part webinar + ebook series called “The Intentional Investor: How to be wildly successful in real estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.

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