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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 53706
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I recently bought a house with my fiance. I gifted her $169,000

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I recently bought a house with my fiance. I gifted her $169,000 for the down payment to qualify for the mortgage. I am on the title, just not the note. What is the best way to avoid paying gift taxes on the $169,000? Can I make it a personal loan and charge the federal interest rate for a long term loan? Also, can I gift her the max gift amount without being taxed each year to cover the note? What are the tax implications of doing this?
Hi! My name is XXXXX XXXXX I look forward to helping you!

You can gift her the entire amount with no gift tax consequences to either of you. Recipients of gifts are not subject to gift tax. And, there should also be no gift tax due from the donor. Each donor can give $14,000 per year per person under the annual gift exclusion. In addition to that, for any amounts in excess of the $14,000 in a year, each person has a $5,250,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,250,000 in gifts over and above the $14,000 annual gift exclusion amount without incurring gift tax....the donor must file a gift tax return to let the IRS know how much of the lifetime exemption is being used, but there will be no gift tax until cumulative additional gifts have exceeded the $5,250,000.

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Customer: replied 3 years ago.

If I file form 709, will the taxes be settled when my estate is dealt with after my death?


Is it a bad idea to create a note, then use the government long term interest rate on the amount borrowed, then do an annual payment? I can gift the note payment to my fiance, and she pay the note back to me each year. Would that work also?

Hi there and thanks so much for following up.

There will be no taxes now and likely none when you die as the result of the gift now. The Form 709 is simply necessary so you can let the IRS know how much of your $5,250,000 lifetime exemption you are using. Presuming that law remains the same, any amount used up now only reduces the amount remaining when you die. So, before your estate would owe any taxes when you die, your estate would have to exceed the remaining portion of the exemption amount.

The note would work fine and then you could make annual gifts under the annual gift exclusion amounts so that no gift tax return would be due because you would not be using any of your exemption amount. I had not addressed this because I was thinking you wanted to make this entire amount a gift. If you do it as a note, if something were to happen to cause your relationship to change and you change your mind about the gifts, she would owe you the money. That's good for you; not so good for her. :)
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