Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.
No. Gifts are not taxable for income tax purposes.
When you refer to a "gift of equity type of loan.......", exactly what do you mean? Loans aren't gifts?
Is your son loaning you the down payment, etc.?
In other words will you have to pay him back?
If so, you should sign a note for the amount credited & he should record a second mortgage for same in order to make any interest that you pay him deductible to you & taxable to him if that is your intention.
We are not putting any money down on this loan. Our loan company calls it a gift of equity home purchase. Our son and us have equal share in the property the home. My husband and I pay 2/3 of the mortgage of the mortgage and my son pays 1/3 of the mortgage My husband and I built this home with the mortgage in my son's name only. A year later my son added on to the home we both pay our own share of the mortgage We borrowed a certain amount and he borrowed, we pay our own amount but the mortgage is in his name only he now wants to sell the whole place to us.
I understand, so it really isn't a "loan" of the down payment, etc. ie. you won't owe anything to your son after the transaction takes place; is that correct?
The only reason it is a "gift of equity" from your son to you is because you put the property in his name when it was originally purchased,
In reality, that's when an actual gift took place; but it was from you to your son; and every time you made a mortgage payment, you made an additional gift to him as the property is in his name alone.
We both have lived in the home for 10 years and we both have made improvements. My husband and I don't want to put a down payment because we have put 10 years of equity into it. We will not owe anything to our son. Our son just wants us to take over the mortgage free and clear. Yes, on the gift of equity. We just want to know if we have to pay taxes on what the mortgage company calls gift of equity. We have a shared bank account he pays we he borrowed and we pay what we borrowed for the home.
No. There's no income or gift tax involved as far as you are concerned.
Your son would be responsible to file a gift tax return for the gift of equity to you, but no gift tax will be due.
What happened when you purchased the property? Who provided the downpayment? What was the reason that you put the property in your son's name?
Thank you so much for your expertise. You answered my question in full. We both went 50/50 on the property. He give us cash and we rolled our half into the loan.
If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;
We will do that. Thank you so much.
You are welcome. Please remember to rate my response; it is the only way we get credit for our work.