Today TaxMama® hears from Susan in the TaxQuips Forum with a good question. “Suppose I purchase a home and keep title in my name and let my parents live in the home rent free. Is the rent-free usage of the property considered a transfer subject to the gift tax? I think not, as I have retained the control over the property. I have not put them on title; and I could demand they move out at any time.”
That’s an interesting question.
You’re right. The home would not be subject to gift tax. But the rent might.
However, you may give each of your parents up to $13,000 per year in gifts without filing a gift tax return. That’s $26,000. Surely the market rent on that place is less than that, right? And if they are in the home as caretakers, to prevent vandalism, to maintain the yard, etc. – the fair market rent value could be reduced by a discount for their care – should anyone ever question it.
It’s really a shame that gift tax issues should even arise when helping your folks out.
And remember, you can find answers to all kinds of questions about helping your parents and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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2 thoughts on “Gift to Parents”
Oh, you are clever people! That’s great.
You could also give them $26,000 which they would return to you in rent. Then you could take all the expenses which would probably result in a loss and deduct that from your income.
You can go another way with this item. You may be able to consider it support and if more than 50% of total support then you may be able to claim an exemption for the parents. Include interest, depreciation, heating, electric, water and other utilities, and repairs if you are paying for them.