Have Tax Questions? Ask a Tax Expert for Answers ASAP
not sure how this works. Am I waiting for an answer?
Because your parents are both Non- citizens and non-residents and because we are talking about TRANSFER taxes here (rather than determining wheher they may need to pay income tax on earnings, this is actually very straightforward
yes, sorry ... was trying to get all the out
you have the right idea in that this caould be done via the lifetime gift exclusion OR through annual gifting
What does that mean - transfer taxes....btw, my father is a non-citizen but my mother is a US citizen. They both live abroad now. I'm a US citizen that lives in the US. The property and the cash are both here in the US.
I see that
gist and estate taxes are TRANSFER taxes.... taxes charged when ownership is transferred through gift (or through that last big gift, transfer of the estate when someone dies)
sorry for the typos "Gifts" and estate taxes ...
Oh. I see. So the gift tax exclusion (lifetime or annual) is applicable to a non-US citizen gifting to a US citizen?
I thought that non-citizens cannot gift without being taxed.
OK 1st thing to understand: The receiver of the gift is not responsible for the tax ... the GIVER or DECEDENT's estate pays the tax
so the exemption DOES affect you, in that it might become smaller after taxes are paid by the estate, but YOU are never responaible for the tax
Now, the gift and estate system is a unified system... that means....
there is a $5,250,000 exemption for every person
even if that giver is a non-citizen living abroad...
SO, if I give you 2,000,000 during life
Ican still give you 3,250,000 from my estate at death, before there are any taxes levied againast it
OK, for the NON citizen, that person will be uinder the jurisdiction fo whatever county he has residency in
As far as the US is concerned, there ae NO taxes there
you don't pay bevauuse you're the receiver.... and he doesn't pay becasue that's betwee him and his country
even if the property is here in the US
he MAY have gift taxes to pay there (in MANY countries the gift taxes ARE borne by the giver)
That's right .... we are talking about transfr of ownership
Yes. I understand
NOw, he may have some INCOME taxes to pay on interest, because the dollars are here
but estate and gift taxes are a whole different system
transfer, not income
You Mother, as a US citized has the 5,250,000 exemption
So, if under 5.25 million, they can transfer the gifts - property and cash - to me
without any tax ramifications
and, by the way, that is slated to go up .... it's 5,250,000 if she were to die today
that's correct .... and depending on large the estate still left at death is, it may make some of the estate taxable at death
remember it's unified estate and gift tax
whatever is given during life subtracts from the eventual estate tax exemption at death
the annual increase in that number was made permanent as part of the lat tax act
I am not 100% on the income tax part. are you talking about the increase in value of the property?
now.... the annual exclusion ... (again, doesn't apply to Dad) he can giver you all e wasnt (so in effect if the accounts are jointly, only your mother's half is a gift that we need to worry about)
ok back to income
in the INCOME tax system ... US citizend are supposed to pay tax on income (earned income, interest, dividends) no matter where that is earned .... RESIDENT ALIENS as well with soe exceptions... but your father, for example... only has to pay income taxes to US on dollars that are called US source income
For your father....?
Maybe some interest income on the bank account
or if he has real estate property here and sells it for a gain
But we're talking about gifts and estates.... transfer taxes
now.... the annual exclusion?
each year your mother (again your dad with have to deal with those in his country of citizenship) can give you (and anyone ELSE she wants) 14,000 per year
and it's COMPLETELY excluded ....(doesn't even go toward that accumulation towards the estate exclusion)
I see, the annual is separate from the lifetime. And my father can give all he wants without paying taxes at all....except maybe in his country. But never here.....except maybe income tax.
you have it! one more thing:
If she gives more than 14,000? she much file a form 709 (gift tax form) whci essentially tracks how much she's giving during life (over and above that excluded amount) ... so that it can some day be deductied against te final transfer ... the estate at death: www.irs.gov/pub/irs-pdf/f709.pdf
I think this one may work better:
You're very welcome
The transfer can be handled in any way - annual, lifetime or after death. With no differences in tax outcome.
ONly in that i she transfers under 14,000 every year, shes saving ALL of the unified credit - No form 709, no reporting
basically, if there's a $27999 account at the bank, they can transfer that to you if its jointly owned (remember only Moms half has a transfer tax implication here) withou ANY tax implication or reporting
28000 / 2
Got it. Dad can transfer all he wants though
yep... just remember that if they jointly own it now and write a check to you 1/2 of that is Mom's gift
I see. Almost missed that point. Thanks.
Are there any tax implications for the property I need to be concerned with?
None whatsoever, the Giftee (receiver of the gift) is never responsible ...hang on one sec and I'll get you the tax citation on that one
wow. sounds all so easy after talking with you. I don't know what I was confused about. Thanks again!!
I'll give one little disclaimer (probably stating the obvious here) you WILL owe tax on any interest, dividends, capital gains, once it becomes yours, gonig forward
If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.
HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.
And feel free to bookmark for future reference
Still with me?
OK, still don't see you coming back into the chat. I'll move us to the Q&A mode ... maybe that will help .... (you can ask any follow-up questions there, just not in real-time as here) .... let me know
Enjoyed chatting with you