Although there are not necessarily tax consequences to you, your children may pay a significant tax on capital gains from the sale of your home if you deed it to them. They can avoid the tax by acquiring your home through probate of your Will, a process that usually costs less than the taxes created by deeding your house. The amount of taxes your children have to pay if they sell your home after your death depends on how they acquire it. For example, suppose you bought your home for $30,000 (also called its "original" value), but the present value has increased to $95,000. If you sell the home before your death for $95,000, you would have a capital gain of $95,000 minus $30,000 or $65,000. As the resident, you would likely be exempt from a tax on that gain. However, in most cases your children would not be eligible for this exemption, and could pay tens of thousands of dollars in taxes on the sale of your home. If you deed the home to them, they are likely subject to this tax. If they instead get the house under your Will, and then sell it for $95,000, they would have $0 capital gain and $0 tax liability. This is because tax laws provide that the home’s value when you die is their "original" value, if the house goes to them through a Will. The cost to probate a will is usually far less than the taxes created by deeding your house.
Some of the other frequently asked questions about deeding your house are:
To see all the questions and answers, click here.The information in this site is not intended as legal advice.
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