The Help Desk

Your tough questions. MONEY's smart answers.
Presented by

What will be taxed if I help my daughter build her new house?

November 19, 2012: 6:30 AM ET

Our daughter is building a new home with an in-law suite for us. I am 72 and my wife is 68. We plan to sell our present home and contribute $300,000 of the proceeds to live in this in-law suite. Is there a tax liability for our daughter or us? Also, since we plan to live out our lives in this arrangement, would this contribution be an estate asset for our beneficiaries? — Charlie H.

The good news: You and your wife won't owe any tax on the sale of your home as long as you don't make a profit of more than $500,000, says Abe Schneier, senior technical manager at the American Institute of CPAs.

But giving your daughter $300,000 complicates that picture. If you give that amount to your daughter as a gift, there won't be an immediate tax liability for you or your daughter, says Schneier. But that gift will reduce your lifetime gift-tax exclusion, which is the amount that you can give until you have to start paying taxes on gifts. Reducing the exclusion may also increase the amount of your estate subject to taxes. (This year, the combined lifetime gift- and estate-tax exclusion is $5.12 million for individuals. Next year, those exclusions are set to fall to $1 million each for gifts and estate tax.)

The new property won't be an estate asset for your beneficiaries unless your names are on the title, says Schneier. While a CPA can help with planning, Schneier suggests speaking with an estate tax attorney who can help you structure an agreement on the property's title or any intentions to include it in a will or trust.

Another option is to purchase part of the home with your contribution, says Mary Kay Foss, a CPA specializing in real estate transactions at Sweeney Kovar in Danville, Calif. You would owe property taxes on your share down the line, and your share of the home would then become a part of your estate.

— Austin Kilham

Got a question for the Help Desk? Send it to

Join the Conversation
Help Desk

Got a question about your money? We want to hear it! Each week we're answering your questions on CNN, Headline News and

Your email or phone number won't be published; we'll use it to get in touch if we need more information about your question.
Help Desk Video
  • NEXT
    Not enough money in America's 401(k)s
    Despite the surging stock market bringing balances to record highs, the average Fidelity 401(k) account has less than $100,000 in it. That's just not enough. Play
  • NEXT
    Explaining Obama's myRA
    President Obama unveiled a new savings plan for retirement accounts, aimed at encouraging people to start building their nest egg. But how exactly does it work? Play
  • NEXT
    Tricks on how to save in your 20s
    Saving for your retirement in your 20s doesn't have to be a financial burden. Prioritizing your expenses is usually the first step in building a nest egg. Play
  • BACK
    Don't get fooled by Black Friday sales
    Here are some of the tricks that retailers use to make you think you're getting a deal. Keep an eye out for them while shopping this Black Friday. Play
Best Tips
Some of the nation's leading business owners, investors, and thinkers share their thoughts on rebuilding your wealth. More
These strategies can help you manage the challenges -- both emotional and financial -- of helping an aging parent from afar. More
You don't need to be fanatical to get to 780. Those in the know say these moves matter most. More
Featured Newsletters

Tips for saving and spending smarter.

Search This Column
View all entries from this: Week, Month
Help Desk
More help for your career, your investments and your budget.
Powered by VIP.