Grant from Father in law

[Mohammed Ahmed]

Hello amazing investors!

I have a quick question probably someone can answer me! someone told me that any family or friend can grant you up to $16,000 tax free first of all is this true? and if it is tax free does it free for me but the person who granted it would still pay taxes on it or because he granted it as a gift he can also deduct it or I don't have a tax deduction and he does??

I am confused as you can see from my writing but I hope to have an answer to this question, to be more clear about the story, I am trying to search for a Multi family, move in, rent the other units hopefully if the numbers are accurate I will positive cash flow, as I am starting out and don't have enough money I wanted to do FHA loan, my father in law wants to buy duplex and let us move in one of the units and he lives in the other so I had an idea he can help his daughter with the down paymnet make the monthly mortgage less and get four-plex he lives in one for free till the money he potentially gives to me been collected and then he pays rent and I live in one unit and rent the other two so I wanted to know about this tax question to see if I can include this pros in my future presentation to him or no

thank you all!! 

[Nicholas Covington]

Hello @Mohammed Ahmed

A single person is able to gift up to 14k per person per year without paying gift tax. A person receiving a gift would never have to pay taxes on that income. A person is technically able to gift up to 5.45 million dollars in their entire lifetime. So anything over the 14k in that year to the same person would needed to be reported to the IRS so that is actually draws that extra 2k from his lifetime bucket without paying gift tax.

The next thing to consider is the loan program you are applying for and their rules on how much, if any, one is allowed to receive as a gift to use towards a down payment. I am fairly certain that for FHA a person can have all of their down payment paid in terms of a gift, but this would be a quick question for your lender.

Another thing to worry about is the terms of which the money is given, it is only a gift if it is not required to be paid back. So if he plans to give you some money, he should not plan to get it back. Just be careful what you say to others when trying to get a loan, he is not technically living rent free if its in terms of him giving you money upfront.