Gifting a Home to your Daughter

[GodFather]

Client asked what tax implications my be inherent if he and his wife gifted a home they own to their daughter during 2025.  While I don't have significant experience with this, I did investigate it a bit and ask that you confirm my understanding is correct:

- Home is above the $19,000 / $38,000 amount but well below the lifetime exclusion.

- Will need to complete Form 709 for the gift.

- No tax implications for my clients or their daughter at the time of the gift.

- Is the daughters basis the original cost of the home?  Tax implications are based on when / if the daughter sells the home. 

- Daughter does not anticipate applying for Medicaid so there should be no issue in that regard.  

- Client is not looking to sell the home, for any amount, to their child. 

Am I missing anything?  Any other insights that may be worth mentioning?  

Thank you. 

[IRonMaN · Accepted solution]

Their cost becomes their daughter's cost.  Now is a good time to figure out what the real cost is. They should do some thinking about any improvements they have done since they bought the home so the daughter has a good number to start with.  Otherwise, you have it covered.

[GodFather]

Thank you, Sir.  I use that term loosely.  

[qbteachmt]

I would ask:

Is there a mortgage or HELOC or any financial stipulation on the property?

Is this the parent's own residence or some rental or a vacation home they never use? Will she be living there as her primary residence?

Is it transferring furnished?

[Skylane]

Assuming the parents are going to continue to reside in the home, the parents should be listed on the deed for life estate or tenancy rights.  It will enable the parents to continue to be eligible for a homeowner's HO3 type insurance policy (owner occupied) and (in many states) the parents will continue to be eligible for a variety of senior benefit rebates, programs, etc. that require home ownership. 

[George4Tacks]

Yes, 709  https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-tax...

[abctax55]

"....Thank you, Sir.  I use that term loosely."  

Sounds as if The Godfather knows Jeff 😉

[IRonMaN]

Hey, I resemble that remark!  😜

[BobKamman]

@qbteachmt's caution is wise because those who jump in with answers off the top of their head are likely to end up bald.  Say the parents' adjusted basis is $100,000 but last year they borrowed $250,000 on a line of credit.  Anyone else see a tax implication there?  

Perhaps more important, the law in my state says I'm guilty of a misdemeanor if, as a tax preparer, I see elder abuse or neglect and don't report it.  So, what the H is going on here?  The question isn't whether the daughter will apply for Medicaid, it's whether the parents will.  Have they already been to a lawyer who has told them to check with their tax adviser before proceeding with getting assets out of their name?  If it's just your average run-of-the-mill "I didn't save for retirement but I still want to leave something for my kid so I'll plan on taxpayer financing instead" case, then wish them  luck when the daughter's divorce complicates ownership.  

[IRonMaN]

The parents are 45, the daughter is 22.  They gave a vacation home to their daughter that they had paid cash for from lottery winnings back in 2015.  Everybody feel better?  It's going to be a long tax season here if we are going to dissect every question down to its bare bones.

[BobKamman]

Every question should include the bare bones.  This one was missing several ribs and multiple vertebrae.

[IRonMaN]

A lot of folks posting here have trouble indicating what software they are using so good luck on getting to the bare bones on every question.

[BobKamman]

I don't need luck because I'm not into getting credit for quick answers for incomplete information.  If details are missing, I can always ask for them, or point out why they are needed.  I don't want others to get the impression that if they have the same question, they can rely on previous guesses.  

[IRonMaN]

If you like, we can all just step aside for awhile and let you field all of the questions so folks can be assured that they get the correct, detailed answer.