Posted on: 11th Mar, 2007 09:18 am
hello,
i am looking to sell my share of my primary residence to my roomate, who is getting married. in him wanting to buy my half of the house, i am looking to set up the transaction that will minimize tax implications. below is some info about my situation...
1) can i use a quit claim deed to get around taxes if i accept a gift payment from him for my half? there is ~60k equity in the house, so i would have to file the 706 or 709 form correct? would there be any other gains taxes on this?
2) he is not refinancing. i would like my name to be off the mortgage. our lender has said he can remove my name without having to refi.
3) the house is in il. i am not sure if there are any special taxes that go along with this for my state.
4) if a quit claim deed is not good for this situation, is there a good alternative? his attorney said he was going to set it up like a normal sale, but i have a bad feeling we will be paying a lot of taxes we probably don't have to.
thanks so much for your help!!
greg
i am looking to sell my share of my primary residence to my roomate, who is getting married. in him wanting to buy my half of the house, i am looking to set up the transaction that will minimize tax implications. below is some info about my situation...
1) can i use a quit claim deed to get around taxes if i accept a gift payment from him for my half? there is ~60k equity in the house, so i would have to file the 706 or 709 form correct? would there be any other gains taxes on this?
2) he is not refinancing. i would like my name to be off the mortgage. our lender has said he can remove my name without having to refi.
3) the house is in il. i am not sure if there are any special taxes that go along with this for my state.
4) if a quit claim deed is not good for this situation, is there a good alternative? his attorney said he was going to set it up like a normal sale, but i have a bad feeling we will be paying a lot of taxes we probably don't have to.
thanks so much for your help!!
greg
hi greg,
welcome to the forums.
if you make a gift to your roommate, you need to pay gift taxes provided you exceed the exemption limit. for this purpose, you will have to file gift tax return using the form 706. the form 709 is used to file both gift tax and generation transfer tax return.
the tax that you receive on the gains through a property sale is the capital gains tax. sop, if you quit claim, i don't think there will such taxes. but you will have to pay a property transfer tax and documentary stamp tax. the amount of transfer tax and documentary tax payable will vary from one state to another.
your lender is correct. he can remove your name by novation. this is a legal way of transferring the loan to another person. but you need to find out if your room mate will be willing to go for a novation.
if the lender sets up a normal sale, then you may use the quit claim just for the transfer of title. but you will have to pay lot of taxes no doubt on the gains.
thanks,
sara
welcome to the forums.
if you make a gift to your roommate, you need to pay gift taxes provided you exceed the exemption limit. for this purpose, you will have to file gift tax return using the form 706. the form 709 is used to file both gift tax and generation transfer tax return.
the tax that you receive on the gains through a property sale is the capital gains tax. sop, if you quit claim, i don't think there will such taxes. but you will have to pay a property transfer tax and documentary stamp tax. the amount of transfer tax and documentary tax payable will vary from one state to another.
your lender is correct. he can remove your name by novation. this is a legal way of transferring the loan to another person. but you need to find out if your room mate will be willing to go for a novation.
if the lender sets up a normal sale, then you may use the quit claim just for the transfer of title. but you will have to pay lot of taxes no doubt on the gains.
thanks,
sara
"2) He is not refinancing. I would like my name to be off the mortgage. Our lender has said he can remove my name without having to refi."
As your lender said there are 2 ways by which mortgage can be transferred over to your roommate, one is novation and other assumption of mortgage by him.
Assumption of mortgage will be possible if a assumption clause exists for your mortgage.
Otherwise it can be novation through which mortgage will be transferred over to your roommate.
As your lender said there are 2 ways by which mortgage can be transferred over to your roommate, one is novation and other assumption of mortgage by him.
Assumption of mortgage will be possible if a assumption clause exists for your mortgage.
Otherwise it can be novation through which mortgage will be transferred over to your roommate.