IRS May Want Equity Forms For Quit Claim Deed Transfer

Added October 17, 2005 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: What do you have to do in terms of taxes if you gift your share of a property using a quit claim deed? It depends on how much equity you own in the property. If you have less than $11,000 in equity in a property you likely don't have to do anything. If you own more equity than that, then you may have to file forms with the IRS describing the value of your share of the property that you quit claimed. An accountant or estate planner should be able to help you determine the tax implications of signing a quit claim deed.

Q: My husband owns a property with his father. My husband pays for the mortgage, taxes and other expenses. The loan is in my husband's name. If his father quitclaims the title to my husband, does my husband need to pay any taxes or other expenses in transferring title to him?

A: Let's divide your question into two parts. From the transfer of title perspective, most states would not tax the transfer of title from your father to your husband, particularly since your husband would not be paying your father-in-law any money.

Some states may charge certain fees for the transfer. Some of these fees may include recording charges and in other cases their may be other fees for the transfer of title.

From the federal income tax perspective, your father-in-law would be gifting his half interest in the home to your son. If there is little equity in the home or the equity is less than $22,000, you probably have no federal income tax consequences in the transfer, as he can transfer his half - $11,000 - to your husband without a problem.

If the equity is much more than that, your father-in-law may have to file additional forms with the Internal Revenue Service relating to the gift to his son in excess of the $11,000 permissible per year.

A good tax accountant or even an estate planner can determine what your father-in-law's ownership interest is in the property due to your husband's payments of the mortgage, taxes and other expenses. It might be that your husband's contributions towards the property have far outweighed your father-in-law's ownership interest in the property and as a result, the transfer would have no federal income tax consequences to you.

Oct. 17, 2005.

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