My mom owns her house free and clear, just paid off her mortgage with a personal loan not too long ago. The thing is she’s on disability and has no real income, so all the plusses of owning a house don’t do anything positive for her. Since she has no income, she can’t use anything regarding the house for deductions on taxes.
For this reason, we’re wanting to put the house in my name so I can take the tax benefits from this. What all would be involved on this since there is no mortgage payment? Would we just transfer the title through a title company, or have her quit claim it to me?
Any help would be appreciated! BTW, we’re in Dallas, TX
Gotcha. So it’d pretty much just be the property taxes? Another reason is for a “just in case” something happens to her she wouldn’t want the house going in to probate and me not being able to have it ASAP. I told her to look in to getting a living trust, because that should help things out and make things easier.
Apparently she wanted to get some cash to pay off high interest credit cards, and do some work to the house. She wanted to get a HELOC because from a 125k house she only owed 30k on the mortgage.
What the loan officer at Wells Fargo convinced her to do was: Get a 61k personal loan, pay off the mortgage, and give her the rest of the cash back. So now she has that personal loan @ 6%. She didn’t want to do this and I can’t see the reasons for the personal loan over an equity loan on the house…
Do you guys think it would be beneficial (if she can get another mortgage < 6%) to take out a mortgage on the house and pay off the personal loan? That way at least there would be some tax deductions available?
Or would moving this loan around just cause more hassles and extra fees?
More hassle, extra loan fees and closing costs, and still no tax benefit. Owner occupied mortgage loan rates on a 30 year fixed rate loan are running about 6% anyway.
The only advantage that might be gained is that the loan rate would be fixed. If her HELOC loan has a variable rate, she could see interest rate increases periodically throughout the term of the loan.
Putting the house in your name now does nothing for your mother and deprives you of an important tax benefit later. If your mother plans for you to inherit the house at her death, under current law, the cost basis will be “stepped up” to the appraised value at the time of her death. This means that you can sell the house immediately and have no taxable capital gain on the sale.
Take title now, and you take title at your mother’s cost basis – essentially whatever she paid for it plus the cost of any capital improvements along the way. When your mother no longer needs the house and you decide to sell, you will have a taxable capital gain on the sale.
I had a couple come to me last year for taxes - they had sold the house that they had inherited from dad. No prob, thought I. Turns out that dad had sold them the house 4 years ago for the bargain price of $10. That’s ten dollars. That “bargain” sale ended up costing them about $15,000 in capital gains TAX! ouch.
Folks, pay a competent CPA, atty, or tax professional the $500 it takes to consult on an estate plan. Don’t try to do it yourself. It’s not worth it.
Another thing to remember is that when a gift is made that the donor’s basis goes with the gift. example: If mom bought her house many years ago and paid $100,000 and gifted it to you, then your basis is $100,000 even though the house might be worth 1 million dollars.
Mark - I am a CPA in California, so the couple you did taxes for would have gotten off easy only paying $15,000.
There are 6 ways to take title in a co-ownership situation. Here’s an analysis of the six different methods published by Chicago Title Company. I think you’ll find it helpful:
Community Property;
Joint tenancy;
Tenancy in Common;
Tenancy in Partnership;
Title Holding Trust
Community Property Right of Survivorship.
I find it to be very helpful and recommend that you download it to have on hand. Enjoy: