Real Estate Taxes?
I will inherit a house that will be given to me by a relative. Which will be better letting the deed be transferred to my name or let me purchase it from them for an agreed amount I need a tax deduction. They are over 75 years of age and how will they be taxed on that money. If I purchase for the agreed amount will I have to go thru closing cost and other required transactions. Which will be better or are there other options?
Public Comments
- You need to consult a real estate attorney. They have (at least) 6 years of schooling to answer these kind of questions.
- If you wait until they die, you will inherit the house at the market value of the house at the time of their death, which gives you a higher basis than if they were to quit claim it to you. A quit claim would just be giving you the house without payment. For a tax deduction, you would need to get a mortgage and pay them for the house. Yes, you would have to pay for closing costs and all other expenses normally charged when purchasing a house. Assuming they have lived in the house as their primary residence for the last 3 of 5 years (maybe 2 of 5), the sale of the house would only be taxable to them if the gain on the sale of the house is in excess of $500,000. The gain would be calculated at the purchase price less what they paid for it plus improvements (not repairs). So, if the house is less than $500K, then selling it to you would be the best way.
- They need a good real estate attorney to set up a trust. By setting up a trust you bypass the taxes. You get the house when they die. When you sell it, it is taxed on the difference from the value of the house on the day you got it and the amount you sold it for.
