17 Jul Can I avoid taxes when selling my father’s home?
Q. I received a joint ownership of my father’s house about 10 years ago with my sister. She always lived there. I share no expenses and she and my dad pay all the bills. We plan to sell the home after our father passes. Can I give her my half so we don’t face taxes?
A. You can, but there may still be some tax consequences.
If you deed your share of the home to your sister, that would mean you’ll avoid any capital gains tax when the house is sold, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.
Your sister would then be responsible for the payment of capital gains taxes, if any, upon the sale of the house.
“Capital gains taxes are not assessed until the property is sold,” Whitenack said. “However, the sister living in the house will have a $250,000 capital gains exclusion.”
In calculating the capital gains tax, your sister would be able to deduct the cost of any capital improvements and the costs of selling the home.
But, Whitenack said, if you were to die within three years of deeding the home to your sister, your sister would have to pay an inheritance tax.
The inheritance tax is determined by the relationship of the deceased to the inheritor. You can learn more about how that works here.
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This story was originally published on July 17, 2019.
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