My then-boyfriend, Jake, and I bought a house and moved in on December 23, 2013. The house cost $114,000 - my dad gifted us $20,000 ===>then unless your father elected to split the gift, he had to file form 709 as $20k of the gift exceeded $13K, annual exclusion amount for 2013; if Father makes a lump sum $26K gift to you, the couple can elect to split the gift, and the entire gift will be free of gift tax under the $13K annual exclusion which is doubled to $26K for the couple
and Jake's parents paid the other $94,000. We are paying his parents 3% interest on $74,000 on a 30 year "mortgage" (we will owe them the other $20,000, but they are not charging us interest on it).==>in this case, they did not have to file form 709 as the gift amount of $20K was less than $26K for gift splitting by his parents.in general for a loan at a low stated interest rate, the IRS may impute interest; to impute interest, irs uses applicable federal rate . however, no interest in imputed on a gift loan of $100K or less if your bf?s net investment(i.e., capital gain or dividends or etc for the year does not exceed $1K.
Jake's uncle is a CPA and was the one who suggested we pay them interest, otherwise they would be charged for gifting us so much money.===>As mentioned above; it depends. they ?d not necessarily be charged for gifting you; they do not have to pay any gift tax UNLESS they gifted you more than $5.25 M for 2013 I guess. So no tax on their gift for their son
He does taxes for the whole family, including me. Jake and I were surprised when he owed on taxes last year because, from what we've heard, you're supposed to get a tax break when you buy your first home. ==========.As mentioned above; he did not have to pay any tax on his gift; a donor pays tax on gift aslongas the gift exceeded $5.25M for 2013.I guess even if you get a tax credit when buying the first home in 2013, when yur tax liability exceeded your credit then you still owe tax to IRS.
To reduce the amount he owed, Jake's uncle suggested he put money in a retirement account, which Jake did ($1,500).===>>right; another easy way to lower your taxes is to pay into a tax-free health flexible spending account or a retirement acct.for example, contributions made to a flexible spending account are not subject to employment or federal income taxes. Or contributions to a 401k retirement account can help lower your taxes by reducing taxable income. The pre-tax money is deposited directly into the 401k account and the growth is tax deferred.
I am currently taking an economics class and learning about the time value of money. It has come to my attention that you're better off if you take out a loan and write off the interest, rather than paying for the house in full (like we did).=============to write it off youmust itemize deductions on sch a of 1040, unless you itemize deductions on sch a you cannot write it off.
My question is - is the loan we have with his parents considered a mortgage?======>I guess so they charged interest;as said no need to impute interest up to $100K unless your investment income is more than $1K. The IRS isn?t concerned with most personal loans to a child. They don?t care how often you make loans, whether you charge interest, or if you ever get paid back. If you loan a significant amount of money to your son/daughter, say, enough to buy a house, it?s important to charge interest.so es.
Should his uncle be writing off our interest payments? ==========>>>>>>interest payer can write off interest payments.
only a few categories of interest payments are tax-deductible:I one example is nterest on home loans (including mortgages and home equity loans)