{"id":45410,"date":"2019-06-05T15:41:12","date_gmt":"2019-06-05T20:41:12","guid":{"rendered":"https:\/\/www.hrblock.com\/tax-center\/?p=45410"},"modified":"2022-07-26T13:23:26","modified_gmt":"2022-07-26T18:23:26","slug":"gift-of-equity-tax-rules","status":"publish","type":"post","link":"https:\/\/www.hrblock.com\/tax-center\/income\/other-income\/gift-of-equity-tax-rules\/","title":{"rendered":"What Gift of Equity Tax Implications Are There If I Buy a House Below Value?"},"content":{"rendered":"<p>A gift of equity is when someone sells you something for less than full market value. <a href=\"https:\/\/www.hrblock.com\/tax-center\/income\/other-income\/do-i-have-to-pay-taxes-on-a-gift\/\">What is gift tax<\/a> and what tax implications does a gift of equity have? We can explain that using an example.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p>Let\u2019s say your grandmother sells you her house for the price she paid 40 years ago. Currently, the value of the house is worth several thousand dollars more. In this situation, she is giving you a gift of equity.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<h2>Gift of Equity: Tax Rules<\/h2>\n<p>In the gift of equity example above, you\u2019ll have no immediate tax impact. However, you\u2019ll need to know the basis of the property for any future transactions. The basis of the property will be the greater of these:<\/p>\n<ul>\n<li>How much you paid for the property<\/li>\n<li>The seller\u2019s adjusted basis of the property at the time of the transfer<\/li>\n<\/ul>\n<p>This amount goes up by how much\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-center\/income\/other-income\/do-i-have-to-pay-taxes-on-a-gift\/\">gift tax<\/a> the seller has to pay, if any.<\/p>\n<p>You should treat the purchase as if they gave you cash to pay them for the difference between what you actually paid and the home\u2019s fair market value (FMV). This difference is the gift they gave to you. Gifts of equity, like other gifts, aren\u2019t taxable to the recipient.<\/p>\n<p>The seller might have to file a gift return. They\u2019re allowed to give $15,000 per person each year without having to file a gift return. So, if the gift of equity they gave you is less than $30,000, they don\u2019t have to file the return. If it\u2019s more than that, they\u2019ll have to file the gift return, but they still might not have to pay gift tax.<\/p>\n<p>Have more questions about gift of equity tax rules?<span class=\"Apple-converted-space\">\u00a0 <\/span>Visit one of our\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-offices\/local-offices\/#!\/en\/office-locator\/\"><b>tax offices<\/b><\/a>\u00a0where one of our knowledgeable tax pros can assist you.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A gift of equity is when someone sells you something for less than full market value. What is gift tax and what tax implications does a gift of equity have? We can explain that using an example.\u00a0 Let\u2019s say your grandmother sells you her house for the price she paid 40 years ago. Currently, the [&hellip;]<\/p>\n","protected":false},"author":658,"featured_media":45443,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[24,50],"tags":[],"class_list":["post-45410","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income","category-other-income"],"acf":[],"yoast_head":"<title>Gift of Equity Tax Implications | H&amp;R Block<\/title>\n<meta name=\"description\" content=\"When someone sells you property for less than full value, it\u2019s considered a gift of equity. 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