Hi and welcome to Just Answer!If I am gifted a house and want to do a cash-out refinance on the house, am I able to?Absolutely - yes. As long as you OWN your property and have an equity - you may refinance and get a cash out. That is based on the creditor's approval. Most creditors require 20-30% equity. If I am able to, am I suppose to report the cash I receive as income or what tax implications come with the cash I receive?There is NO any tax implications as long as that is a true loan - and it is expected to be paid back. The gift is also not taxable for recipients.
I can still do a cash out refi if I own the house 100% or do I have to have an outstanding mortgage loan on the house before doing that?
Please see for reference IRS publication 525 page 31 left column - - http://www.irs.gov/pub/irs-pdf/p525.pdf
Gifts and inheritances. In most cases, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you.There is no any amount limit. That is for income tax purposes. That would be the donor who files form 709 - gift tax return - not recipients of the gift. The gift tax return is required when the total value of the gift is above $14,000 (for 2013) per person per year.There will not be any gift taxes unless the lifetime limit of $5,250,000 (adjusted every year for inflation) is reached.
I can still do a cash out refi if I own the house 100% or do I have to have an outstanding mortgage loan on the house before doing that?You do not have to have a mortgage - and may refinance with the cash out option with or without a current mortgage. For instance - if the value of the property is $100,000 - the maximum amount you may receive woudl be $70,000 - $80.000. Different lenders have different equity requirements.
In case there is a mortgage - the maximum cash out amount is reduced by the mortgage outstanding balance. If there is NO mortgage - you may receive the maximum amount.
Great, thank you for clearing that up.
You are very welcome.
My dad owns the home, in order to gift it does he have to go through a lawyer or can a title company do the gifting?
You may use legal service - but that is not required. If you want you may use any real estate agent helping you with paperwork. That might cost ~$400-$500.Or your father may simply use a Quit Claim Deed. Contact your county for accepted form.you may review an example here - http://www.wikihow.com/Get-a-Quit-Claim-Deedbut use the one which your county accepts.
One last question, If I receive a cash gift, am I suppose to report it as income? For example, say my mom gives me 20K just to have money, is that reported?
As I mentioned above - gift is NOT a taxable income in the US. So regardless of the value - nothing is reported by you.Your mother will be required to file a gift tax return because the gift is above the annual allowance - $14,000 in 2013. However unless she made large taxable gifts before - there will not be any gift tax liability for your mother.
Ok thank you so much, you've been very helpful
You are very welcome.Please be sure to come back for all your tax related issues.
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