Q: My husband and I own a house in Georgia, but we moved to Florida four years ago to be near my ailing parents. Our son has been living in the house. He has since married and the time has come to sell the house.
Do we quit claim deed it over to our son to either fix up or sell? And how does that work from Florida to Georgia? Or do my husband and I sell the house ourselves?
We want to be sure that any profit from the sale is shared between us and our son and daughter-in-law. There are some repairs that need to be done on the house, including painting the interior and repairing the deck, but these are things we don’t have the money to repair.
My mother suggested selling the house as is and try to get the most out of it, since it has become a burden to all concerned.
There is a second mortgage on the house that my husband and I make payments on and our son has been paying the monthly mortgage. We want to the quick and painless thing. Can you suggest anything?
A: Is there going to be a profit when you sell this house? ThatÃ¢â‚¬â„¢s the first question you have to ask yourself. You calculate the profit by taking the sales price of the home and subtracting the cost of purchase, the cost of sale (including the commission), and the cost of any capital improvements you made (and can document) while you lived in the property.
LetÃ¢â‚¬â„¢s say there is going to be a big profit. If you could rewind the clock, the best solution would have been to sell the house to your son last year, or three years since you moved out of the property.
Current tax law provides that you and your husband would have been able to keep up to $500,000 in profits tax free. The only catch is you have to have lived in the house as your primary residence for two of the past five years. If you sold last year, you would have qualified to take the profits tax-free.
Then, your son would own the house free and clear and could sell it and take his profits tax-free as well.
Unfortunately, no one I know knows how to reverse time. So, I think your best bet is to sell the house as quickly as possible. If there are any profits, you may have to pay capital gains tax on them at a rate of 5 or 15 percent, depending on your income this year.
Once you have sold, you have the ability to share the profits with your son by making a tax-free gift. You and your husband can each give your son and his wife $11,000 per person, for a total of $44,000 per year.
Don’t mess around with gifting your son a portion of the house now. It will only complicate a messy situation. But I do think you should run your plans by your tax preparer or accountant, just to make sure you’re not missing anything and he or she may have additional suggestions based on specific information you may give him or her relating to your property.