Do you need an idea for a holiday or a birthday gift?
More families may be feeling a little extra generous this holiday season and are offering loved ones help with a down payment on a home.
Coming up with the down payment has become a major obstacle to home ownership, according to a survey by Trulia from September. The survey found that 51% of 758 renters surveyed said coming up with the money for a down payment was what was preventing them from buying a home and 36% said qualifying for a mortgage was holding them back.
But with the holiday season approaching, a down payment gift under the Christmas tree can the best gift one can give and receive.
However, if giving a down payment gift, gift givers must remember that “under the federal tax law, each individual is permitted to give away money or valuables worth up to $13,000 to a single recipient in a calendar year,” according to an article at The New York Times. “A married couple could jointly bestow up to $26,000 a year per recipient.” However, the same married couple could LEGALLY bestow another $26,000 a year for the spouse – husband or wife – of the gift receipient. For example, $26,000 for a Daughter and $26,000 for a Son-In-Law (or Son and Daughter-In-Law) thus providing a downpayment of $52,000 per couple per year. The maximum gift can be given by the same couple next year, again $52,000 bringing the total downpayment to $104,000 for the home buying couple – unless the Congress changes the maximum gift amount allowed by law.
The federal tax law allows the gifter (the person bestowing the gifts) the maximum amount to be gifted to un-limited number of gift recepients every year, for as long as the gift tax code is active and allowed by the Congress. Anything above the maximum annual exemption could be considered a taxable gift and must be reported to the IRS.
NOTE: For TAX advice always contact a CPA tax Accountant.
NOTE: The gifted downpayment money must be a true gift. It cannot be a loan to the home purchaser disguised as a *gift* from a gifter. To prevent loan fraud lenders require a Gift Letter signed by the gifter stating the money is a true gift and does NOT have to be re-paid by the person receiving the gift. In other words, the gift cannot increase the borrower’s debt-to-income ratio. Private loans disguised as *gifts* and used as downpayment to purchase a home or other real estate property is considered a mortgage fraud.
NOTE: The gifter can be anyone, family member, a friend, or and employer.
SOURCE: The New York Times
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