If you're thinking about transferring your home to your child, you may want to do your research. That's because there are some administrative and financial considerations you may want to weigh out before you make the move.

The costs associated with a title transfer vary by state and by how the transfer is accomplish🍎ed. Filing a deed yourself may be the cheapest method, but it requires quite a bit of homework to ensure you fill out and file the appropriate paperwork correctly.

Online legal document centers, such as LegalZoom, offer deed transfer services for around $250, plus filing fees. These services typically include title research, creation of the real estate deed, and filing of the deed with the county recorder's office. You can also hire a real estate attorney to execute the deed transfer. This might be the most expensive option, but it may also be the least stressful s♐ince you w♏ill be certain the transfer was executed appropriately.

Tax Consequences

The tax consequences of selling a property to a child can end ไuꦚp costing them more money than if they were to inherit the property later.

Let's assume you originally purchased your home for $50,000 and put $20,000 into the home over the years. It has a current market value of $250,000. Because you transferred the home to your child while you were still living, your 澳洲幸运5官方开奖结果体彩网:cost basis of $70,000 becomes your child's basis.

If your child sells the home for $250,000, they would owe 澳洲幸运5官方开奖结果体彩网:capital gains taxes on the difference between the sale price and the cost basis, which would be $180,000. At a capital gains rate of 15%, that would equal $27,000 in taxes. The tax rate would be higher if you owned the home for less than one year, at which point the profit would be taxed as 澳洲幸运5官方开奖结果体彩网:ordinary income.

If your child moves in and lives in the property for at least two out of five years before selling it, up to $250,000 of profit can be excluded if they sell it as an individual, and up to $500,000 can be excluded if they file jointly with a spouse. Your child will have to use your cost basis of $70,000, which includes the $50,000 澳洲幸运5官方开奖结果体彩网:purchase price, plus the $20,000 in improvement costs.

Transferring the Title vs. Inheriting

If your child inherits the property upon your death (instead of you transferring the deed to them), the child will receive the stepped-up basis, where the value of the property on the date of your death becomes the child's basis. So, if the property has a market value of $250,000 at the time of your death, your child could sell the home for $250,000 and not be responsible for capital gains tax.

The Bottom Line

If you are considering passing on your home to your children, you need to be aware that there are costs and taxes associated with the transfer. They vary by state and by how the transfer is done. Ultimately, the transfer could end up costing your children more money than if they were to inherit the home. If you're in the position to gift or sell your children your home, consider hiring an attorney to walk you through the process.