Can You Give Real Property to Someone Without Paying Personal Income Tax?

by Jill Stimson J.D. ; Updated July 27, 2017
The IRS views a gift as a unilateral transfer of property without any consideration in return.

In some cases, the IRS allows taxpayers to real property as gifts without requiring them to pay taxes on the transfers. Generally, the IRS taxes the donor or the person making the gift but does not impose income taxes on the person receiving the gift. However, when the recipient receives real property as a gift, then the recipient will owe taxes on the gift when selling property, based on fair market value and tax basis.

General Exclusion

The general IRS rule is that all gifts are taxable, unless the federal tax code contains an exception to the general rule. The IRS views most gifts as a neutral event for tax purposes. In other words, gifts under the allowable gift limits are neither taxable nor reduce the taxpayer’s tax liabilities. The IRS does provide tax deductions for charitable donations of qualified property. Congress provides gift recipients with favorable tax treatment, and gift recipients do not have to include the fair market value of their gifts or cash value on their tax returns. However, Congress enacted the gift tax laws requiring gift donors to pay taxes if their gifts exceed the annual tax limits.

Gift Limits

Current as of February 2011, taxpayers who make gifts of $13,000 or less do not owe federal taxes on those gifts. The gift limit applies to each individual transfer, and taxpayers may make multiple gifts to different donees and avoid paying gift taxes if one donee does not receive property valued at more than $13,000. For example, if Mike gives a gift deed to Jim for Lot A with a fair market value of $13,000, then Mike can also give Joan a gift deed to Lot B without owing taxes. If either sells their lots, then the IRS will most likely impose real estate gain taxes, if the fair market value of their property exceeds the allowable tax limits. Additionally, gifts to qualified charities, to the taxpayer’s spouse, for tuition or medical expenses paid directly to education or medical institutions on someone’s behalf and gifts to political organizations are not taxable, regardless of its fair market value.

Fair Market Value

The IRS uses fair market basis value to determine non-cash gifts. At the time of the transfer, the fair market value of the gift property must not exceed the allowable limit--$13,000 for 2011. This amount determines the recipient’s tax basis for disposition purposes. In other words, the recipient will claim income on the fair market value exceeding $13,000 when selling it. Taxpayers may calculate fair market value with real estate valuations of comparable property at the time the taxpayer makes the gift.

Gift Splitting

The IRS also allows taxpayers who own property together to combine their taxable gift allowances and make joint gifts without triggering taxation. Taxpayers who make joint gifts can use the federal gift-splitting rule to make nontaxable gifts of up to $26,000 to each donee. Taxpayers who take advantage of the gift-splitting allowance must file an IRS Form 709, even if the gifts' fair market values are less than the threshold. The form provides the IRS with both of their signatures as evidence they mutually consented to the splitting.

Considerations

Since tax laws can frequently change, you should not use this information as a substitute for legal or tax advice. Seek advice through a certified accountant or tax attorney licensed to practice law in your jurisdiction.

Video of the Day

Brought to you by

References

About the Author

Jill Stimson has worked in various property management positions in Maryland and Delaware. Stimson worked for the top three property management companies in the commercial industry and focuses her career on property building logistics and tenant relationships. She holds a Juris Doctor and a Bachelor of Science in psychology.

Photo Credits

  • house and key image by hans slegers from
Cite this Article | raiffeisen-cards.ru A tool to create a citation to reference this article Cite this Article

Related pages


tax exempt annuitysalary calculator increasetenants in the entiretyterm bond vs serial bondtenants rights in georgiastocks trading under $1online dutch auctionstockholder equity formulastock market bubble definitioniso vehicle symbolsrainier fundswisconsin state income tax formsform trk 1td canada trust feeswallets that protect your credit cardswhen does life insurance expirecalculate common shares outstandingdow jones industrial average websitewhat is a good dividend yieldusataxpymtalabama ebt onlinedoes renters insurance cover car theftflorida tenants rightsprivate schools autistic childrenqualify for hud housingnetspend reload onlinexlt stock trading coursehow to create an easementunder water mortgageirs taxpayer pinwhat are pork bellies in the stock marketdonate plasma make moneybuying bonds in singaporeeffective duration calculatorhow much tax do i pay on lottery winningstransfer cvs prescriptionquit claim deed form nchow to avoid currency exchange feesunited way tax deductionkmart sales ad weeklyfilelatehow to find marginal revenue product of laborhousing authority of springfield monj mortgage assistancemorgan stanley capital introductionkmart weekly ad onlineat&t refill gophone onlineincome limits apply what does that meanwhat does maturity date on a loan meanhow to become a mortgage processordefine travelers checkgrants for private school tuitiondonating plasma austincan i insure a car not registered in my namechase food stamp cardis volunteering tax deductible401k withdrawal retirementronald mcdonald house scholarship loginschedule h&r block appointmenttax deductions checklistforeclosure laws in oregonwhat does pending debit meanchecking account negative balancedda checking accountdo speeding tickets affect insuranceri unemployment statusactivate mastercard debitpay stub definitionflorida notary courseamortized cost of bondsprint bill pay optionstpes of carsbond indenture agreementalabama payday loan lawsmortgage forbearance planhow to address a manila envelope