Mark Kohler explains how adding a child to a home's title can accidentally create a $500,000 taxable gift. A $1.2 million house with a $200,000 mortgage leaves $1 million in equity. Putting a child on the deed transfers half that equity to them, triggering potential gift-tax consequences.
This is problem number 1. So in our example of a $1.2 million home, let's say you bought it for $200,000 and maybe you had a HELOC or a mortgage on the property of $200 grand that's still hanging around. You did some remodeling. So you've got a million-dollar property net worth, right? It's worth $1.2, but there's a mortgage on there for $200 grand. So you've got a million dollars of value. So if grandpa or grandma's still alive, just one parent, and we put Child number 1 on title, you just gave them half of the house and half of the equity. That means you gave them $500,000. Mm-hmm.
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