Quit Claim Deed May Not Require Taxes To Be Paid

Q: If someone transfers a house to me using a quit claim deed, do I owe income tax? Does the giver owe a gift tax?

A: If you win the house in a lottery and you receive the home by quit claim deed, you will owe tax on your winnings.

But for vast majority of people who receive a home by quit claim deed, the person that receives the home doesn’t have to pay any income tax. But if you didn’t pay for the home, your “purchase price” or your “cost” of the home might be what the prior owner of the home paid for it. If you receive the home from your parents and they paid $50,000 for the home, when you receive the home, your cost basis will be the same $50,000.

If you sell the home before owning it for one full year, and you sell if for more than $50,000, then you’ll probably have to pay taxes on that difference.

Transferring homes from parents to children using a quit claim deed is usually not the best method of wealth transfer from a tax perspective. It does allow a parent to feel good about keeping a home in the family while they are alive, but there are other methods that parent can use to avoid the many tax issues that can arise and haunt the child later on when the home is sold.

On the other hand, depending on the value of the property, the giver might owe gift tax. Please consult with your tax preparer.

Read more stories about quit claim deeds and taxes at ThinkGlink.com

IRS May Want Equity Forms For Quit Claim Deed Transfer

Quit Claim Deed Vs. Warranty Deed To Transfer Property Ownership From Father to Son


Rate This Article
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...Loading...
Related Topics
, , .
View our other articles that are related to this post.

© Ilyce R. Glink. All rights reserved. This content may not be used, distributed, syndicated, compiled or excerpted in any medium or form without written authorization from Think Glink, Inc. For information on syndicating ThinkGlink.com please contact us.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>