I'm looking to buy a new home and will need help from my parents for the down. Do any of you have experience with this in terms of what taxes come into play? The lender is asking us to sign a "gift letter", but since the amount my parent's are going to be helping me out with is over $22k I'm worried about tax implications.

Can we just sign this "gift letter" and not be taxed? My parents don't want to have their names on the title anywhere (co sign, deed of trust, etc.).

TIA.

 

Would it be possible to have your parents deposit the money in your account and let it sit for a few months? That should get around some problems and the underwriter usually wants to see the money is "seasoned" (been in the account for several months). Run that by and see what they say.

 

They will want a trace on such a substantial deposit, they want to make sure it came to you legally, not through drugs, etc. Don't worry about the tax stuff, they won't bother you on that side, they just need security in that your house won't get repo'd if you bought it with drug money or the like.

 

You might want to talk to your lawyer. I was recently in a similar situation, however my stepmother's a lawyer so her office took care of everything for me.
In my case it wasn't considered "income" for tax purposes, but we're in different countries so...I don't think I'm much help.

 

Lawyer and/or accountant should answer this specifically because they are (or can be made) aware of both the financial structures and the law. I'm going through a similar situation currently and my mortgage broker consulted their in-house lawyer for my solution.

GL with it

 

(In the US) Your parents, or anyone, can give you up to the annual exclusion amount (11K) every year without having to file a Gift Tax Return. (That's 22K between them.) Anything over that will require them to file a gift tax return for reporting purposes. No tax will be due, but they still have to report the gift. The gift won't be income to you. A gift of equity in real estate has to be reported if it exceeds the annual exclusion amount. 709s are due when income taxes are due.

I can't tell you anything about the letter the bank has other than that the bank doesn't really care that you're getting a gift. They're concerned that you won't be able to meet the mortgage or property tax obligations without future gifts.

If you parents are giving you more than 22K or if they have taxable estates (3 million between them), then they should be doing this through an estate planning or tax attorney.

 

Thanks for the replies.

It seems like it won't be much of an issue. The gift letter looks like it's just for the bank to make sure the money is indeed a gift from my parents. I'm more worried about the IRS making note if it.

I can't let the money sit in there too long because I have to get loan approval fairly quickly. I jumped on a house that was a good buy. I'll let you guys know if I get owned by uncle sam.

 

You won't be in trouble if the IRS notices, but your parents may get a slap on the wrist from the Service if they don't file a 709. Do them a favor, since they're doing you one, and run this by their attorney or CPA.