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Gift of Equity from parents
In October 2012 I was placed on title with both my parents. I currently live in the residence with my mother. It will be my primary residence. I will be refinancing and removing them from title in a month or two.
I was told by IRS that I had to have an appraisal done on the house when I was placed on title (162K). They said that this value would be cut in thirds (54K) and would mean each parent would be gifting me (27K) . I subtract the 13K annual allowable gift without having to be taxed and get 14K. I was told that they would not have to pay any taxes if they put it against their lifetime gift tax credit.
I was wondering if the mortgage amount still owed on the property has any affect on the gift tax claimed?
And when I refi and remove them from title, I was told that I have to have another appraisal and that they would claim the rest of their thirds next year. What if it was placed in a trust, which I may want to do?
I feel like I’m missing something and don’t want to miss out on possible tax relief or there to be another way. I just don’t want my parents to have to pay any more taxes then necessary and don’t want it to be a burden on them. Thanks.