I have a general question. Later this year, my parents plan to buy me a condo, it will be with their money but the property will be in my name. The property is about $100K. How much extra $ should I have taken out of my paycheck now so that when I file my 2006 taxes, I can lessen the amount I need to pay later? I don't make alot (I chose a career that satisfies my civic duty but not my wallet) and have no deductions.
Thanks in advance for any advice you can give me. Zoe
You have some tax planning issues here. You should probably consult a professional that deals in tax and estate planning.
How much additional should you withhold if you don't make that much? Everything... Not sure, but you are looking at $90K in taxable income if declared. However, there are exceptions. Here is what I recall, not a tax guy, so don't hold me to it.
The exemption for gifts is $10K per year, I think. If you are married, your parents could give you 10K and your spouse another $10K. Anyways, assuming you are not married that leaves $90K. However, I beleive that could just be called an early inheritance and would go against the estate limits of the parent/parents.
However, why not just have your parents co-sign and give you $10K a year? Or, have them as joint tenants with right of suvivorship and draw an agreement that give you 10% per year (assuming they pay the $100K). If you don't have a spouse, you should consider the JTWRS with parents to avoid the property going through probate.
Again, you have some planning issues here and anyone that is married with property/assets should seek professional advise in this area. Even as a CPA, I am not an expert in this type of stuff as I do accounting information systems and audit.
The tax issues are your parents - not yours. Generally, you can gift up to $12,000 a year without tax consequences, however it is the person making the gift that has to file returns, and I think the cumulative gift limit is around a million dollars.
If your parents anticipate a sizeable estate, they may want to consult with an attorney or CPA about structuring the transaction so that you are gifted a 10% or so interest each year.
Best Bill
Thank you for your answers. I didn't realize that my parents had the tax burden. I assumed since I was the receiver, I had to pay the tax on it. I think it's time to go to an attorney.
Thanks again!
"brecker" wrote
Huh? There's a gift here, from the parents to the child. No income is recognized by the child, and no deduction by the parents.
The parents will have to file a gift tax return, but there would generally not be any gift tax due as there is a reduction in the lifetime exclusion from estate tax.
Geesh. The gift tax exclusion is $12,000, making the combined from both parents to the child $24,000.
Remember now, that is thet ~~~ANNUAL~~~ amount. That means they can't give you a tacky tie for Christmas if they max that amount out, so remind them to knock off a few bucks for this year. Also, if they gift up-to $24,000 in
2006, they can gift another $24,000 in January.
Actually, the parents have the tax problem, and should seek the advice of a lawyer versed in real estate.
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