Will Children Pay Taxes on Gift of A Home?
In a deed, a seller states that the transfer amount is one dollar and gets it notarized. It is then sent to the parish clerk.
There is often confusion about the right method of transferring a deed and the potential consequences. When a home is transferred as a gift, the heirs will get the property at the transferred basis (not the “stepped up basis”) thereby potentially increasing any capital gains that will be owed on the property in the future.
Also, unless properly structured, the owner’s homestead exemption can be lost. If the heir intends on living in the property as his or her home, the Louisiana homestead exemption will apply. A resident can have only one homestead exemption. However, if the parent continues living in the home, or if the heir already has a homestead exemption applied to another residence, the deed should be structured in a particular way so as not to lose the Louisiana homestead property exemption.
The Louisiana homestead property tax exemption exempts the first $75,000 of value from property taxes. Personally, I think that the exemption should be raised, since it has been very many decades since it has been adjusted for inflation. But I have no say in the matter.
Most every state has some form of homestead exemption. Every state also has specific eligibility requirements for the exemption. In some states, every homeowner gets the tax exemption, while in other states, eligibility depends on income level, property value, age or if you’re disabled or a veteran.
Nj.com’s recent article entitled “Will changing this home’s deed cost us any money?” explains that in New Jersey, the Seller’s Residency Certificate addresses whether there should be income tax withheld, or whether an estimated tax payment should be made, in connection with the transfer.
In Georgia, to be granted a homestead exemption, an individual must occupy the home, and the home is considered their legal residence for all purposes. However, those away from their home because of health reasons will not be denied homestead exemption in the state.
In Louisiana, the home must be titled in one of several particular ways, the resident must live in the home as their primary residence.
You should talk with a tax attorney before transferring your home to the next generation to qualify for as many exemptions as possible. BOOK A CALL with Ted today to discuss the proper deed form for your home and to reduce future income taxes that your home would generate.
Reference: nj.com (April 24, 2021) “Will changing this home’s deed cost us any money?”