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How do taxes work if I'm buying a home from my parents for below market value?

I currently live in a home in Observatory Park in Denver that I own with my mother.  My mother wants to sell me and my husband the house, valued at about $480K, for $400K and finance the loan through her.  We would need to change the title from being me and my mother to being me and my husband.  How can we do this and avoid hefty gift taxes on the property, given that I am already a partial owner of the house but did not put down any equity?
  • July 24 2013 - University Park
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Answers (3)

Hi-

Speak to an accountant because you have not said if this is your primary residence or a rental as this can make a huge difference. This coupled with the fact of the basis of the purchase price, what the appreciation and what your annual net income is. They will be able to tell you if you have a tax liability and exactly what that is once you provide them with all of this information.

Best of luck!

Debbie Taylor, Realtor
  • July 24 2013
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Profile picture for SoCal Engr
Talk to an accountant, but it shouldn't be an issue. We did a quit-claim and the ramifications were...

-- No tax implications for the recipient.
-- Gift taxes on the person giving the house.
-- Gift taxes are offset by credits, against a "total estate value".

Your specifics will vary, but it sounds like your looking at a max $80K (i.e., the difference between the $480K and $400K). You should also consider that gifts up-to-$13K per-person-per-year is not required to be reported or taxed. That's $26K between you and your spouse.
  • July 24 2013
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Hi user1962392, as each situation is so unique, I would strongly recommend speaking with your tax accountant. Best of luck!
  • July 24 2013
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