Gifting Apartments in NYC

           The largest single group purchasing apartments in today’s market is the first time home buyer. Often many of these clients are gifted money from family members raising the question  “If I gift down payment money to my child; what are the tax ramifications for me?” The Hoch Group set out this week to answer this question and provide you with the answers. Please note that I am not an accountant or a lawyer and you should consult with your accountant or your lawyer before you make any financial decisions.

 With gifting, to be clear we first must understand according to federal law what is defined as a gift.  According to About.com if you “give jewelry, stocks, real estate or any other type of property to a family member other than a spouse or to a friend and they don’t pay you the full market value and you have no expectations of getting the property back in the future than you’ve made a completed gift that may be subject to federal gift tax.”

 Who pays this gift tax?

 The giftor; the one giving the gift is responsible for paying this tax. The person who receives the gift does not have to report the gift as part of their annual income. 

 How much can I give away during my lifetime without being taxed?

Currently you can give away gifts in value up to $1,000,000 during your lifetime without owing any federal gift tax.  When you give gifts valued at more than $13,000 annually you have to file a federal tax gift form- Form 709 with the IRS.  This $1,000,000 lifetime amount is in addition to the $13,000 a year you are allowed to gift. 

 If you give more than the annual amount during the year and you file for a gift tax form the remaining amount that is gifted can be taken out of your lifetime gift amount.

 For example if you give $15,000 one year and you filled out a 709 for a Lifetime Gift as well only $2,000 that year will come out of your $1,000,000 lifetime gift exemption.

 Does that $1,000,000 lifetime amount have to go to the same person?

No that $1,000,000 lifetime amount can be gifted among multiple parties. 

 How much of a gift can be excluded from taxes?

 According to About.com federal law also exempts the first $13,000 of gifts made annually to anyone other than a spouse from the federal gift tax law.  $13,000 is an increase from the $12,000 exemption that was available in 2008.This dollar amount is referred to as the annual exclusion from gift tax. 

For example if a father gifts his son $12,000 in January and then $110,000 in June; $109,000 of that gift will be taxable and the other $13,000 will be free of tax.     

 Always consult with your financial advisors and accountants before making any final decisions. 

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