Parents can make an outright gift of a home to an adult child. Any gift that exceeds the 2024 annual exclusion of $18,000 will be subject to gift tax and require that a gift tax return be filed.
The person receiving a gift does not have any tax implication. The person gifting the gift does. But only if they exceed the lifetime gifting limit. Unless the giver of the home is ultra wealthy, no tax implications.
In California, real property is one of the most valuable assets you can inherit from a loved one. But inheriting real estate that has increased in value over time can trigger capital gains tax consequences when you sell that piece of property.
There are four ways you can avoid capital gains tax on an inherited property. You can sell it right away, live there and make it your primary residence, rent it out to tenants, or disclaim the inherited property.
When a house is transferred via inheritance, the value of the house is stepped up to its fair market value at the time it was transferred, according to the IRS. This means that a home purchased many years ago is valued at current market value for capital gains.
While each situation is unique and other factors might influence the decision, from a tax perspective, inheriting a property is often more beneficial than receiving it as a gift. Considering the overall estate planning strategy and potential non-tax implications is crucial.
Inherited properties can come with financial responsibilities such as existing mortgages, unpaid property taxes, maintenance costs, and insurance requirements. Be aware of hidden costs, including emergency repairs, property management fees, and legal expenses.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
When you sell a house for less than its fair market value, you must report the difference as a gift to the IRS. Under IRS rules for the 2023 tax year, you can give up to $17,000 as a gift of equity before you pay gift taxes. As the seller and gift giver, you must pay the gift tax if it exceeds the limit.
Yes, your parents can gift you $100,000 for a house — but they'll have to file a gift tax return to disclose the gift since it exceeds the IRS exclusion amount of $18,000. Filing a return doesn't necessarily mean they'll automatically have to pay taxes.
Gifted property can be taxable, but those taxes may vary based on different factors, like whether you want to make the gift during your lifetime or as an inheritance. Most of the time, the recipient will only have to pay taxes on real estate when it's sold for an amount that exceeds what's known as the cost basis.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
Gifting the House
If your home is valued at the allowed price or less, you may gift it to your children. As a rule, if you are gifting property valued at more than $14,000 in any one year, you must file a gift tax form, unless the recipient is your spouse. Keep in mind, this price applies to individuals.
One thing we hear often is, “if I deed my house or my property to my children they are going to have to pay taxes on it. Right?” Well, the answer is probably no, and here's why. If you deed property to a child, that's a gift of that property and there is no gift tax that the child would pay.
Key Takeaways. Transferring your parents' house into your name could make you subject to capital gains tax and responsible for any increase in the value of the house. There are situations where your parents' house is not considered in their Medicaid eligibility.
In general, any inheritance you receive does not need to be reported to the IRS. You typically don't need to report inheritance money to the IRS because inheritances aren't considered taxable income by the federal government.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
In California, there is no state-level estate or inheritance tax. If you are a California resident, you do not need to worry about paying an inheritance tax on the money you inherit from a deceased individual. As of 2023, only six states require an inheritance tax on people who inherit money.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
Inheriting a home entails a range of financial responsibilities that can quickly add up. Property taxes, insurance premiums, ongoing maintenance costs and unexpected repairs can significantly strain beneficiaries' financial resources.
If you inherit a house, changing the deed is one of the first things you'll want to do. It's an important step that ensures your name is on the deed and proves your legal entitlement to the property moving forward. Here's a step by step guide that breaks down this process.
An inheritance tax is levied on the value of the inheritance received by the beneficiary, and it is paid by the beneficiary. There is no federal inheritance tax. Inherited assets may be taxed for residents of Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
“Cash is king when it comes to leaving an inheritance,” said Carbone. “It's the simplest asset to deal with in terms of a transfer.”