Gift Tax - Gift over $15k to married couple?

Question

I'm selling my house and buying another one, had everything lined up so my house would sell a week before I close on the new one. That sale fell through, but I'm still under contract to purchase the new house and want to move forward as scheduled.

In order to help cover the down payment, which was going to come from the sale of my current home, my parents are giving my wife and I $20,000.The plan is for them to wire the money directly to the title company toward the purchase of the new house.

My parents would rather not bother with a gift tax form, so we're calling it 2 gifts of $10k, one to my wife, one to me, for a total of $20k.

In order to avoid the requirement for a gift tax return, should they make 2 separate wire transfers of $10k each, to clearly show that its 2 separate gifts? Or can they just make one wire transfer of $20k, and if the IRS ever questions it just tell them is was a gift of $10k to each of us.

Their bank charges $25 per wire transfer, so they'd rather not make an extra transaction if its not necessary, but its worth the extra fee if it means not hassling with a gift tax form.

Just wondering what the folks on this forum think.

Slickterp · Answer

Two separate not needed.

But honestly, they are giving you $20K, and worired about $25 fee?

Max Hoopla · Answer

Make the wire transfer to you and your spouse jointly.  The donor's intent should be obvious.

curtisports2 · Answer

I see no reason why this would even be questioned.  Before your parents would have to file gift tax returns, they would have to give the two of you over $60k.  As it stands, each of them is giving each of you $5,000, well under the filing requirement.  Even if only your or your wife had a solo bank account, the parental gift of $20k would be $10k each to that one person, still well under the filing requirement.

NA · Answer

The gift exclusion rule is by RECIPIENT.

If you gift your son $10K, that's less than the annual $15K exclusion, so no form.

If you gift your daughter in law $10K, ditto.

As others have stated no matter how the money gets to the closing, you need to fill out a gift letter stating that these are true gifts with no expectation of repayment.

? · Answer

Right now, there's no limit anymore on the amount of a gift that is tax free.  Double check it, but that was the case in 2012.

Judy · Answer

Doesn't matter, the requirement for the gift tax form is still in effect based on the TOTAL given, not who gets it. But unless they've given a lot of large gifts before, they won't owe a gift tax or even eat into their lifetime allowance. The gift tax form isn't that big of a deal.  But if each parent gives the two of you half of the amount, they'd be below the cutoff to have to file the form - but would be a problem if it comes from joint accounts.  In any case they'll have to fill out a gift form for your closing, certifying that it's a gift, not a loan, and there is no expectation of repayment.

Casey Y · Answer

Cut checks to each of you, for $10k each.  Easy as pie.

Confirm your lender is cool with the down payment coming from a third party.  Given the situation with your current home, they probably wont mind...depending on where your finances are otherwise.

Anonymous · Answer

I'm surprised that the lender/closing agent would even allow a direct payment from a third party directly to the closing agent for the down payment.   The funds are supposed to come from the buyer (and your purchase and sale contract probably says that).

If dad wants to make a 10k gift to you and mom wants to make a 10k gift to your wife, they should do just that:   write each of you a check for 10k and then you deposit them into your account(s).  That's what a cash gift is...money with no strings attached that you can do whatever you want with whether that's buying a car or a house or a vacation.

Either way, the lender will probably require a gift letter from your parents (which should be no issue if the money actually is a gift).

? · Answer

Always solicit financial advice from anonymous Yahoo users.  What could possibly go wrong?!

Gift Tax - Gift over $15k to married couple?

9 Answers