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How to buy a home from parents for cost of loan?

My mother is looking to downsize and wants to sell me her home for what she owes $355,000. The value of the home is $500,000. I have read that the $150,000 can be considered as the down payment if she gifts me the equity of the home. Is this accurate? Also, how does a gift of equity work? Would she be liable for tax on $150,000? She lives on a fixed income and I do not want her to have a huge tax bill.

Thanks 
  • July 15 2013 - San Jose
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Answers (2)

Profile picture for aracz
Also look into if there is Prop 13 on the property.

All the best,

Arpad

  • August 27 2013
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Profile picture for wetdawgs
Yes, she can give you a gift.

Yes, she is liable for gift tax if in excess of the IRS gift limit of $14,000 (check with IRS, I know they bumped it up this year but can't remember exact amount).   If you have a partner, she can also gift the partner a similar amount without taxes.     A clever accountant will be able to work out how to spread the gift over several years to minimize the impact. 
  • July 15 2013
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