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Quit Claim Deed Tax Implications

Ask the Real Estate Lawyer: Real Estate Law Q&A

REM #LAW 669

By Ilyce R. Glink and Samuel J. Tamkin

Summary: What are the tax implications of quit claim deeds? There are two issues that need to be looked at. First, is the property transfer itself taxable? Second, do gift taxes need to be paid?

Q: My husband owns a property with his father. My husband pays for the mortgage, taxes and other expenses. The loan is in my husband's name. If his father quitclaims the title to my husband, does my husband need to pay any taxes or other expenses in transferring title to him?
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A: Let's divide your question into two parts. From the transfer of title perspective, most states would not tax the transfer of title from your father to your husband, particularly since your husband would not be paying your father-in-law any money.

Some states may charge certain fees for the transfer. Some of these fees may include recording charges and in other cases their may be other fees for the transfer of title.

From the federal income tax perspective, your father-in-law would be gifting his half interest in the home to your son. If there is little equity in the home or the equity is less than $22,000, you probably have no federal income tax consequences in the transfer, as he can transfer his half - $11,000 - to your husband without a problem.

If the equity is much more than that, your father-in-law may have to file additional forms with the Internal Revenue Service relating to the gift to his son in excess of the $11,000 permissible per year.

A good tax accountant or even an estate planner can determine what your father-in-laws' ownership interest is in the property due to your husband's payments of the mortgage, taxes and other expenses. It might be that your husband's contributions towards the property have far outweighed your father-in-law ownership interest in the property and as a result, the transfer would have no federal income tax consequences to you.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website




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