ERA Justin Realty Report: Real Estate Decisions and Beyond
“If you are getting ready to move out of your longtime home into more sunshine, and have made a determination that you will not be selling your house, you can actually gift it to a child or friend but that gift will come with a few strings attached. In many countries around the world, once the parents die, the children simply move into the home and take over the master bedroom. While that progression still occurs in the United States, estate taxes, rising home values, job transfers, and the desire for a separate space and different environment have changed the use of the traditional family home. The bottom line is that the home has evolved from basic shelter to the average person’s hopeful most valuable possession. It needs to be carefully protected, guarded, and even nursed along–much like the responsibilities that took place within the home itself. And the financial value is usually accompanied by priceless memories and experiences, making the family home beyond doubt the ultimate asset.” This is information brought forth by author Tom Kelly in his book “Real Estate for Boomers and Beyond,” reported ERA Justin Realty’s Rosemarie Zembryski a Realtor agent with the firm.
Zembryski suggests, “First and foremost, your child or friend’s basis in the house will be what you paid for the property, plus major improvements. Because this cost you paid years ago is probably much lower than today’s increased home value, there’s a chance tax will be owed on a subsequent sale. Before moving forward with what we review here, tax laws and legal consequences continually change and our facts and figures are suggestions on how the process has worked in the past. You should review your path with your legal and tax advisers first.
Kelly’s book when written stated with terms always changing and updating, “For example, if you purchased your home in 1970 for $60,000 and it is now worth $450,000, your child’s basis would be $60,000 if you chose to transfer the home to the child as a gift. Capital improvements are the cost of improvements having a useful life of more than one year. Examples include the new roof, dock, deck, remodeled bathroom, and finished basement. Generally, an expense is a capital improvement if it adds value to the property or extends its useful life. If these criteria are not met and the expenditure is considered necessary to maintain current usefulness, it is a maintenance cost.”
If you are going to gift your home to an individual, it’s best to offset the amount by first using your annual gift tax exclusion of $14,000 per gift. You can gift $14,000 (this amount may change, verify the current tax laws) to any one person in any year. Hence, if you and your spouse each make a gift to both your child and her spouse, you can offset it against the home’s value.
Zembryski concluded, “Tax regulations do change, so take the time to check with a tax attorney or an accountant before making any moves. Be certain that goals are shared and discussed. You’ll find it saves time, money and anxiety.”
For more information about ERA Justin Realty and on real estate topics, consumers can reach their Realtor agents at either of their two Rutherford offices at 118 Jackson Avenue or 57 Park Avenue. By phone at (201) 939-7500, (201) 438-0588 or (201) 438-SOLD. Additional real estate information is also available at the firms 1000’s of homes websites at www.ERAJustin.com and www.ERAJustinRealty.com.