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My girlfriend and I are planning an addition to my house. Since she currently lives 1000 miles away she gave me $5500 to apply to the architect's bills this year. That's well under $14K so no gift tax problem.

I own my house free and clear. At some point title to the enlarged house will be put in both names, though we don't plan to marry for a number of reasons. We're in our late 60's, BTW.

I will contribute the existing house and she will contribute the addition and some remodeling to the existing house. Ideally when the remodeling phase arrives I'll kick in enough so we both have roughly equal financial stakes in the finished house.

My concern is how we deal with paying the construction bills so neither of us incurs any kind of tax burden. I'm thinking if she gives me money to pay construction bills that will be viewed as a gift and subject to gift tax. Am I being paranoid or should I insist she write all the construction checks? Just trying to avoid a problem before it arrives.
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