AboutHelen P. O`Planick, EA Expertise I am a tax professional, with experience in individual taxation. I would prefer not to answer questions about non-resident aliens or corporate taxation. Please do not ask me state related questions, unless the state is Pennsylvania. There are 42 taxing states and 42 TOTALLY different sets of state tax law.
Experience I have been preparing tax returns almost all my life. I have been in professional practice for 25 years and I am enrolled to practice before the Internal Revenue Service.
Organizations National Association of Enrolled Agents
Publications I am a prior Money Magazine Tax Test taker and have been quoted extensively in all media including monthly periodicals and books by tax authorities.
Question QUESTION: hello! thank you for providing this service!
my name is on the deed and mortgage of a house my parents live in (so all 3 of our names are on the deed & mortgage). they are planning to sell their house and i am not planning to take any profit from the sale (i do not live there. do not make any of the payments.). i would like to prevent myself from having to pay capital gains tax on my "1/3" share. if i file a quit claim deed and remove my name from the deed, but yet my name is still on the mortgage, when the house sells, do i have to pay capital gains tax? or do i also have to remove my name from the mortgage (want to avoid this since it'll cost a lot more than a quit claim deed).
thank you!
ANSWER: You can do a quit claim if you want, you will have to file a gift tax return, but doing that will not get all of you out of taxes. Since you owned a third, whomever sells that third (and I'm assuming that would be your parents) will owe tax on that third. They cannot exclude that portion of the sale.
Helen, EA in PA
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QUESTION: thank you for your quick response..
- so that i understand fully, if my name is on the mortgage but not on the deed/title, i do not have to pay capital gains tax on the house?
- if i sell my 1/3 to my parents for a nominal fee, $10.00, i don't have to file a gift tax return?
- the house is the primary residence of my parents and they meet the 2/5 rule.. but they still need to pay tax on the 1/3 share they receive from me?
thank you!!!
Answer The mortgage has nothing to do with anything, so you don't have to worry on that aspect.
Selling your portion for $10 is still a gift, and it is a gift as long as you don't sell for a good market price. So you will still have to file a gift tax return.
Your parents meet the rules on what they have previously owned, but they have not owned YOUR portion for 2/5 years, so that is why they have to pay on that part of the gain.
