21 Jan What happens with taxes after we sell grandma’s house?
Q. I am listed on the deed for my grandmother’s home. We are about to sell it. The proceeds are going to be split three ways between me, my aunt and my uncle. I live in New Jersey and the home is in New York. I am going to give this money to my mother so it won’t really be an asset to me. What are the tax implications going to be?
A. We’re sorry to hear about your grandmother.
For you, the property is deemed to be an investment property.
That means the profits on the sale are subject to income tax and, most likely, at capital gains rates, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
He said because the property is in New York, you will have to file and pay tax to the State of New York.
As a New Jersey resident, the profit also will be taxable to New Jersey, Karu said, however, you will receive a credit against your New Jersey tax for the tax paid to New York.
When you gift the funds to your mother, most likely there would not be any gift taxes unless you have already made substantial gifts during your lifetime.
But there is another option.
“As an alternative, you can gift your one-third interest in the house to your mother. That would transfer the filing responsibilities and tax consequences to her,” Karu said. “Your only requirement would be to file a gift tax return to memorialize the gift.”
Additionally, Karu said, the deed should be amended to reflect your mother as the third owner and your name should be removed from it.
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This story was originally published on Jan. 21, 2020.
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