Posted: Mon Dec 15, 2008 11:28 pm Post subject: Tax Consequence
Five years ago my dad and sibling purchased a home together and my dad unexpectedly passed away a couple of months after the purchased and I've been helping my sibling with the mortgage ever since. We now want to do a refi but my sibling won't qualify unless I become a co-borrower. It is my understanding that I would have to be added to the title/deed of the house in order to refi and my question is will the IRS hit me with a gift tax on the equity that has been built since the purchased? _________________ Need help choosing the right loan? Get free consultation from community lenders/consultant
As far as I know, when you will be refinancing the loan, the property taxes can be re-assessed and it may even change. But I don't think you will have to pay gift tax on the equity of the property. However, to be on the safer side, consult a tax assessor.
jerry, i don't know what question you were answering above; our poster has asked about federal taxes, i believe.
poster...i don't think you're liable for a gift tax, but you can certainly ask a tax advisor (or go directly to the irs, for that matter). _________________ George M. Akerley
Loan Officer
Prospect Mortgage
37 Jerome Avenue
Bloomfield, CT 06002
860-286-0444
jerry, i have never heard of reassessment of propery taxes subsequent to a refinance of a property. maybe that's just because connecticut doesn't do it, but i have a hard time imagining that tax assessors around the country would be monitoring every refinance so that the tax rolls could increase/decrease with each transaction. _________________ George M. Akerley
Loan Officer
Prospect Mortgage
37 Jerome Avenue
Bloomfield, CT 06002
860-286-0444
Thank you both for your time! I've contacted a CPA, a bookkeeper, and the IRS and they all said that since refinancing(me becoming a co-borrower) is not an economic activity, thus it's not a taxable event.
As for reassessment of property taxes subsequent to a refi, California doesn't do it either. If they did, it might be to my advantage since home prices have fallen so much.
I think I have placed the information in a wrong way. What I actually meant to say was as there will be a change in ownership of the property, there are chances that property taxes will be re-assessed and they may increase. I have wrongly mentioned the term "refinance" in my post.
Thank you very much George for clearing the whole issue to the original poster.