Tax on gift from parent--?

demeronJuly 29, 2006

My father wants to withdraw some money from an IRA to enable me to avoid PMI. (Yes, I feel guilty, but that's another story.) Probably between 10 and 15K. My understanding is, he will have to pax taxes on it taking it out of the IRA, but no penalty, as he is 70. As I understand it, I will *not* need to pay taxes on it if it is less than $12K just to me, or if it is more, he could give a few K to my husband. Am I right?

If I take a home equity loan to avoid the PMI, he could make the withdrawal next year and possible avoid putting himself into a higher tax bracket this year--?

Is this right?

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clemrick

The tax implications about the IRA sound right, but I'm not an expert on that. The IRS allows gifts of $11,000 per recepient per year with no tax owed (the tax for more than $11K per year is paid by the giver). So your dad can give you $11K and $11K to your husband.

However, since this will be going toward your downpayment, check with your mortgage person and see if your father has to fill out a gift letter. Mortgage lenders want to know that the money is gift and not another loan.

    Bookmark   July 29, 2006 at 10:19AM
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demeron

Well, the mortgage is already complete. This is a new construction house and we have one opportunity to re-amoratize, presumably when we sell this house (fingers crossed). So there aren't any more hoops to jump through, no second closing.

    Bookmark   July 29, 2006 at 2:47PM
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mariend

Talk to your tax person, perferably a CPA.

    Bookmark   July 29, 2006 at 10:10PM
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