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Regardless of which of those options you choose, no one would owe any taxes on this transaction.
Under current law, each taxpayer may give up to $1 million in gifts during their lifetime before they actually owe any gift tax. There is an additional $13,000 annual exclusion which does not even apply or reduce the $1 million lifetime limit. Gifts which exceed the $13,000 annual exclusion must be reported by the giver of the gift by filing Form 709 with the IRS which is a gift tax return. However, no gift tax is actually due until that taxpayer has used up his allowed $1 million lifetime exemption.
So if you simply paid off this home and then gave it to your daughter, you would be giving her a gift which is worth $145,000. You would report giving that gift by filing Form 709 and you would split the gift between you and your husband, showing that you each gave your daughter $72,500 in gifts. That would then simply reduce the remaining limit on lifetime gifts for each of you down from the $1 million to $927,500 of gifts you could give in your lifetime before any gift tax would be due.
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Thank you Patty