Gifting money is a great way to help your child to cover a down payment or closing costs for a new home. What makes it so appealing? The Gift Tax and Lifetime Gift Tax Exclusion.
What is The Gift Tax?
The Gift Tax is the taxation of any monetary gift exceeding $15,000.
Many individuals stay within the $15,000 limit per year, per person, and easily avoid having to pay this tax. However, in the case of gifting for a down payment or closing costs on a new home, this limit can be reached quite quickly.
The solution? The lifetime gift tax exclusion. This is an additional $11.7 million that you can gift over your lifetime that is free of gift tax.
How does it work?
Once you exceed the tax-free limit of $15,000, you dip into your lifetime gift tax exclusion of $11.7 million. Which extends over the lifetime of the giver. Making it possible for you to gift down payments or closing costs for a child or relative looking to buy a home, without having to worry about the gift tax.
To learn more about the Gift Tax and Lifetime Gift Tax Exclusion, contact a VanDyk Loan Originator today!