Most down-payment ‘gifts’ won’t result in tax penalties
Most parents don’t have to fret about the tax consequences of helping a grown child with the purchase of a home, but there are some exceptions.
My husband and I would like to contribute to the down payment on our son’s first home. We are vaguely familiar with the federal “gift tax” laws but don’t know how they work. Can you please explain?
Sure. The Internal Revenue Service allows an individual to give up to $15,000 a year to any number of children, grandchildren, stepchildren or someone else. That means you can give as much as $15,000 to your son, and your husband can give him an additional $15,000.
If your son is married and you’re flush with cash, you and your spouse could each give another $15,000 to his wife. Combined, that would equal a juicy — and tax-free — $60,000 to purchase their first home.
You may be subject to the federal gift tax if your generosity exceeds those limits but, generally, only if the cash you give (or have given) away pushes you above the IRS-defined “lifetime tax exemption,” which currently stands at $5.6 million.
Obviously, few people have to worry about such tax pitfalls. But since the gift that you and your husband want to make likely will involve thousands of dollars, it would be wise to consult an accountant or estate planner before signing the check or wiring the money.
And as for your son, I hope he rewarded your proposed generosity this past Mother’s Day with a bit more than an inexpensive card, wilting roses or a small box of chocolates.
REAL ESTATE TRIVIA About 17 percent of homebuyers today are single women, according to a survey by the National Association of Realtors, compared to only 7 percent of buyers being single men. Some researchers suggest that the uptick is the result of rising pay for women, plus higher monthly alimony and child-support payments that some single mothers can claim as income when applying for a mortgage.
How come all the poorest places in a city are called “Skid Row”?
Though opinions vary, the term “Skid Row” likely developed — devolved, really — from a busy thoroughfare named Skid Road in downtown Seattle during the second half of the 19th century, according to historians at the U.S. National Park Service.
Seattle’s Skid Road and its historic Pioneer Square quickly became the center of the small but fast-growing town in the 1850s. Lumberjacks in the Evergreen State would move their logs from the nearby mountains by greasing them and then “skidding” them down the dirt road to a waterfront sawmill owned by Henry Yesler, who soon became rich and the city’s new mayor.
Skid Road, since renamed Yesler Way, eventually became a sort of demarcation line that separated Seattle’s more affluent residents and upscale businesses on one side of the road from the poorer folks and multitude of bawdy saloons on the other.
As the U.S. population soared and inner-city areas across the nation swelled with the poor — many of them dealing with alcohol or drug addiction, or having criminal records — they began occupying several rows of streets and roads rather than just one. So the term “Skid Row” began to be used for an entire neighborhood that was filled primarily with unfortunate souls who had “hit the skids” of their personal lives.
Our old refrigerator is just too small for our growing family. Are fridges usually part of retailers’ Memorial Day sales, or would we save money by waiting until Black Friday in November?
November’s Black Friday sales events are usually the best time to purchase refrigerators and other large appliances, but the discounts offered during Memorial Day weekend are often a close second.
Memorial Day arrives on Monday, May 28, but some big-box stores and other retailers have already announced plans to start their sales extravaganzas a week or more earlier. Experts at bargain-hunting website DealNews.com report that Home Depot and J.C. Penney are among the nationwide chains that are expected to offer discounts of up to 40 percent on fridges, washers and dryers. Many will offer free delivery, haul-away or installation — especially if the purchase price of the item tops $300 or $500.
Most retailers will also offer steep discounts on small kitchen items, from electric can openers and blenders to toaster ovens and microwaves. Vacuum cleaners will be near their lowest prices of the year, too.
May is also a good time to buy a mattress.
“If you’re flexible on the specific type of mattress you want to buy, don’t settle for anything less than 50 percent off,” said Donna Doyle, an editor at DealNews.com. “Also, look out for coupons to take an extra 10 percent to 15 percent off already discounted models.”
ABOUT LIVING TRUSTS David Myers’ booklet “Straight Talk About Living Trusts” explains how even low- and middle-income homeowners can now reap the same benefits that creating an inexpensive trust once provided only to the wealthiest families.
For a copy, send $4 and a self-addressed, stamped envelope to D. Myers/ Trust, P.O. Box 4405, Culver City, CA 90231-4405. Net proceeds will be donated to the American Red Cross.
Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.