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 dasmith2727
Joined: 03 Aug 2007
Posts: 1
1.75 Dollars($)
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 Posted: Fri Aug 03, 2007 1:45 pm Post subject: What is our tax impact if we sell the home? |
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| My mother-in-law plans to sell the family home to her son and I for 1/2 of its appraised value. The money that we pay her (1/2) will go to my husband's sister. So we get the house and she gets half the appraised value. We need to make improvements so need to get a loan. We were told that my mother-in-law can quit claim the house to my husband and I and then do a refinance to get the money to pay her (that will go to his sister) and have extra money for improvements. Is this a good thing to do? What are the tax implications down the road for us if we eventually sell the house for obviously much more than we paid my mother-in-law (1/2 the current value)? |
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blue
Joined: 21 Oct 2005
Posts: 1138
Location: MARYLAND
135.15 Dollars($)
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| Posted: Fri Aug 03, 2007 2:23 pm Post subject: |
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Hi Dasmith,
Welcome to Mortgagefit discussion board.
| Quote: | | We were told that my mother-in-law can quit claim the house to my husband and I and then do a refinance to get the money to pay her (that will go to his sister) and have extra money for improvements. |
Yes this method can be used to get the home in your name. And then you can get a mortgage to pay your husband's sister.
| Quote: | | What are the tax implications down the road for us if we eventually sell the house for obviously much more than we paid my mother-in-law (1/2 the current value)? |
When you will sell the house if any profit is made from the sale then capital gain taxes may have to be paid. But taxes will be due only when the capital gains tax exemption limit is crossed.
As per laws you can make profit of $250,000 if you are a single owner and twice that if married, & not owe any capital gains taxes. This exemption is available only if following conditions are met:
1. The home you sell is your primary residence and you are not using it as an investment property and,
2. You live in that home for 2 out of the 5 years before its sale.
If at the time you sell the house these two conditions are met then you can make a profit and not have to pay any capital gains tax.
Do let me know if you have any other questions.
Thanks
Blue
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carnahandavid
Joined: 21 Dec 2006
Posts: 239
58.40 Dollars($)
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| Posted: Fri Aug 03, 2007 3:17 pm Post subject: |
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Your mother in law is quit claiming the house for value less than its present market value so she may have to pay gift taxes if the value of gift exceeds allowed gift tax exemption limits. But no taxes for you to pay at the time you receive ownership.
| Quote: | | Is this a good thing to do? |
I don't see any problems with use of quit claim deed to get ownership from mother in law. You can go ahead. |
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levine
Guest
0.10 Dollars($)
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| Posted: Fri Aug 03, 2007 4:07 pm Post subject: |
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| Quote: | | then do a refinance to get the money to pay her (that will go to his sister) and have extra money for improvements. |
If there is no mortgage on the house right now then it will be a new mortgage and not a refinance.
If suppose appraised value of the house is $100,000, you can easily get mortgage for up to 80% of this value if you are able to qualify (There are other options also where you can borrow more than 80%). So you can pay your husband's sister $50,000 (half of appraised value) & still have $30,000 to make improvements to the house (80% of $100,000 = $80,000 less $50,000). |
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larry
Joined: 27 Jun 2007
Posts: 3328
473.40 Dollars($)
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| Posted: Fri Aug 03, 2007 10:23 pm Post subject: |
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Hi Dasmith,
If your mother-in-law wants to transfer the family home to you and your husband, then a quitclaim deed will serve the purpose. And you can refinance with a new loan and pay your sister-in-law. To know more on how to transfer property through quitclaim deed, you can refer to: http://www.mortgagefit.com/quitclaim-deed.html
But on selling the home, you may have to pay the required capital gains tax on the profit earned through sale, provided if you do not qualify for the exemption limit of 500,000$ (as joint filer). |
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