How much money can I give my son before he has to put it on his income taxes?

Question

I inherited some money and I want to help my son with his house payments now instead of waiting for him to get his inheritance.

Answer 1

You can give him as much money as you want and he will never have to pay taxes on it.  However, if you give him more than $12,000 this year, you will be taxed on part over $12,000.

Answer 2

You can give him as much as you want and he will not pay taxes.  Their is one consideration though.  If you give hime more than $12,000 in a single year, then you have to report the excess over $12000 in your estate and gift taxes.

The amount over 12,00 will go against the amount you are allowed to give away over your lifetime.  It is actually a whole separate tax from income taxes.  The IRS makes you track gifts over $12,000 to prevent wealthy individuals from giving away their estate just before they die.

Answer 3

It's not as bad as it sounds.

For cash, you just do it.  While the amount over $12,000 per year gets reported on form 709, the IRS doesn't actually make you pay tax until you have given away more than $1,000,000 in gifts.

The taxable gifts become part of your estate, but if you only have, say, $500,000, it makes no difference whether you give him the cash now or after you die.

If it's not cash, keep in mind that he needs to know your basis in the asset when he sells.  You can't avoid capital gains by giving him the asset.

Answer 4

Gift tax issue not income tax issue

$12,000 a year

Suggest you give him just a little for his house payments, and put a nice sum as an additional payment of principal on his mortgage:  This will decrease his interest payments by tens of thousands of dollars and shorten the repayment period if you make a nice lump sum extra payment of principal.  Extra Payments of principal whether $25 or 50 per month or $2,000 or $5,000 at one time have a STRONG impact on loan repayment.  It doesn't reduce his monthly payments, but reduces the amount of interest he pays versus principal (building equity) and reduces the length of time he pays before paying off mortgage.

So, give him a little cash to help with his mortgage payments this month and next, but put some money down as extra principal payments giving LONG-TERM impact of your gift, saving him thousands of dollars in interest over years.