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Subject:  Re: gift tax question Date:  8/1/2005  11:29 AM
Author:  DeltaOne81 Number:  80198 of 132872

Here's all the info on gift tax (and estate tax) that you need (read the 'Unified Credit' and 'Gift Tax' sections)

Basically, Megan is right. Each person can give each person $11k in each year without any implications. Beyond that, you begin having implications, but it first goes against your lifetime 'unified credit' of $345,800

Let's say they gave you $50K. By Megan's example above, $44K is completely free and clear. The other $6K they have to report as beyond the exclusion. Let's say they're in the 28% tax bracket, so they'd pay $1680 in tax. All they do is subtract is amount from their lifetime unified credit of $345,800, leaving them with $344,120 remaining in their lifetimes. Only if they get this number down to zero in their life do they need to actually start paying taxes on gifts.

In fact, the $345,800K (representing up to ~$1 million) in gifts may apply to each of them separately, though I'm not sure about that - read the IRS pub for full details.

P.S. You may think it's none of my business, and it may not be, but before you embark on something like this, I would recommend you buy or borrow the Millionaire Next Door and each the chapter on EOC - Economic Outpatient Care.

Your parents helping to buy you a house can lead to overspending for the rest of your life. If they help you buy a house with a mortage you can't afford, then you'll have trouble saving forever. If it's in a higher status neighborhood, you may feel compelled to pay more to keep it up, pay more for nicer cars to impress the neighbors, send your kids to private school because those in your neighborhood look down on the public schools, etc, etc, etc. It depends on the situation and the people involved, but more often than not, large gifts from parents cause more financial problems than they solve.

Just something you may want to think about and a book you may want to pick up before you make a big decision like this.
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