Laboratorio Soluna

Preserving Tax Breaks for Home Ownership if Title to the Property Is Changed

Preserving Tax Breaks for Home Ownership if Title to the Property Is Changed

The banks didn’t want to be stuck with an assumption with lower interest loans as interest on new loans was increasing substantially

get up to $250 cash advance

This is a very clever way to transfer ownership in the property without creating a gift and a penalty. This deed is not available in all states but works very well in the states that allow it. The concept is quite simple. The deed transfers ownership of the property at the death of the Medicaid recipient. Any transfer of the home by a Medicaid beneficiary or by the spouse of that beneficiary, while that beneficiary is alive, will create a penalty. In this case, the transfer creates a penalty as well. But because it is at the death of the Medicaid recipient, it is irrelevant that a penalty is assessed. The deed retains ownership in the home for the Medicaid beneficiary and as such it is not considered a gift and no penalty is assessed by creating a ladybird deed.

Gifting a personal residence prior to death or to sale by an owner who has resided in the home for at least two of the last five years results in a loss of significant tax breaks. If the personal residence is sold while the owners are alive, a lifetime capital gains exclusion of $250,000 for a single individual or $500,000 for a couple applies to the sale. Thus, if a portion of the exclusion has not been used previously, either $250,000 worth of equity or $500,000 is excluded from capital gains taxes of 15%. As an example suppose that a couple has established a basis in their home of $50,000 based on their original purchase price plus improvements and adjustment of any depreciation claimed for business use. Suppose that the home sells for $400,000. Without the capital gains exclusion, the couple would have to pay a capital gains tax of 15% of the difference between their basis and the selling price — $350,000.

Leer másPreserving Tax Breaks for Home Ownership if Title to the Property Is Changed

Item added to cart.
0 items - $0