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my husband and I own a home which we would like to leave to

our daughter. The house...
my husband and I own a home which we would like to leave to our daughter. The house is free and clear. Which type of deed would we use so that she incurs the least taxes.
Quitclaim, Gift ??
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Answered in 14 minutes by:
8/2/2012
DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 794
Experience: Years of Experience in Business & Personal Taxes
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Welcome and thanks for your question!

Transferring your house to your daughter via a quitclaim deed would be considered a gift as far as the IRS is concerned. Gifts in excess of $13,000 a year to one individual require filing a gift tax return (Form 709) with the IRS, but most likely you and your wife will not owe any tax on the gift.

Taxes on gifts are payable by the donor not by the receiver. However, as I mentioned above, most likely you and your wife will not owe any gift tax.
  • First, the IRS allows gift-splitting between spouses. This means that you report half the value of the gifted home on your Form 709 and your wife would report the other half on her Form 709.
  • Second, you and your wife can each give up to $13,000 to any individual without paying tax. That means the first $26,000 of the gift to your daughter is not considered a taxable gift.
  • Third, he IRS allows taxpayers a lifetime exemption on gifts under a certain amount. In 2012, the lifetime exemption is $5 million. The exemption is on an individual basis, so you and your wife could gift up to $10 million in assets combined.
I'm assuming the value of your home is under $10 million, so based on the above criteria, you would not owe any tax on the gift to your daughter, but would need to file a Form 709 to report the gift to the IRS.

Regardless, gifts are not considered taxable income to whomever receives them, so your daughter would not incur any tax on you transferring title of the home to your daughter.

Please let me know if you need any additional clarification and I will gladly assist you. If you are satisfied with my answer, please give my answer a positive rating. Thanks and have a great day!
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Customer reply replied 5 years ago

The lifetime exemption you said is for 2012. Do you know how long it will stay at this amount. Our home is way under 10 million. Thanks for your help.

The $10 million is currently slated to expire at the end of 2012. It is slated to return to $1million each - so $2 million total on January 1, 2013.

All talk seems to indicate that Congress will most likely enact legislation to increase the exemption for 2013, but it is impossible to predict what it will be until that legislation is passed. Most seem to think it will be somewhere between $1 million and $5 million per individual.

Please let me know if you any further questions. If not, please give my answer a positive rating. Have a wonderful day!
DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 794
Experience: Years of Experience in Business & Personal Taxes
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Hi Jean,

I just wanted to follow-up with you to see if you needed any further assistance. Please let me know if you need anything else and I will gladly assist you.

If you have not done so already, please give my answer a positive rating so I receive credit for my work. Thanks and have a great day!

Danielle
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DanielleCPA
DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
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