Jason asked:
My wife and I just found out that my mother in-law has been letting a family member pay her mortgage for her. Roughly 2400 a month. Does she(mother in law) have to declare this as income?
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My wife and I just found out that my mother in-law has been letting a family member pay her mortgage for her. Roughly 2400 a month. Does she(mother in law) have to declare this as income?
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Tags: Family Member, Mortgage Payment, Mother In Law
9 responses to If someone pays your monthly mortgage payment for you do you have to declare that as income?
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The first 13,000 that she receives can be considered a tax free gift, but any amount after that is taxable.
Consolidating Debts
The first 13,000 can be a gift but after that it is taxable. If the family member is married then the husband and wife can each give your mother in law 13,000 for a total of 26,000 tax free.
It maybe that the person donating the gift to your mother in law is the one that pays the tax and not your mother in law.
If someone pays your monthly mortgage payment for you do you have to declare that as income?
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Is she an elderly dependent of the person(s) paying the rent/mortgage? Then it’s tax deductible to the person(s) who are paying, for example, if it is, say, a son & daughter-in-law. If your wife’s mother is not an elderly dependent, she can receive non-taxable gifts, and if within the annual gift-giving limit, there is no gift tax payable by the donor. Again, say it’s a son & daughter-in-law who are the donors, and the limit is $13,000/year, so those two could donate $26,000/year without any tax obligations on any party.
So the question is, why aren’t you and your wife helping to support her mother if she is elderly and needs help? Why is all the burden of helping to care for an elderly relative solely in another person(s)’ hands?
If someone pays your monthly mortgage payment for you do you have to declare that as income?
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Ignore the post that says the gift is tax deductible. It isn’t. Gifts are never deductible.
A gift is not income to the recipient.
It’s not a deduction for the giver.
If the gift is more than $13,000 in one year (12 times 2400 = $28,800), the giver must file a gift tax form.
Since your MIL didn’t pay the mortgage payment, she can’t take a decuction for the interest.
Since the family member doesn’t owe the mortgage, neither can they.
If someone pays your monthly mortgage payment for you do you have to declare that as income?
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If it is more that $13,000 annually and is considered a gift (nothing expected in return), the gift giver should be filing IRS Form 709. Although, no tax is due until it exceeds $1 million total.
If someone other than whoever is liable for the loan is paying it and somebody is taking an interest deduction on it, that would be illegal. The family member could not legally deduct interest and your MIL cannot deduct it because she is not paying it. And property taxes could only be deducted by owner(s) on the deed.
But we really cannot say with the information provided. It depends upon who is giving her the money, do they live in the home, is there any agreement to pay it back or ownership agreement or does the person paying expect to inherit it?
If someone pays your monthly mortgage payment for you do you have to declare that as income?
Consolidating Debts
No. It is a gift.
Student Loan Refinancing
She does not declare this as income. She does not include this on any tax return.
The money is support provided by the family member to your MIL.
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This would appear that a family member is supporting your MIL. In this instance the money to pay the mortgage is neither income to her nor is it a gift from the family member. If they can claim her as their dependent by providing more than half of her support (and she meets the income guidelines) then this is treated as support, not a gift.
Even if it is a gift, your MIL does not report it as income though the donor may have a gift tax filing requirement.
If someone pays your monthly mortgage payment for you do you have to declare that as income?
Student Loan Refinancing
Ordinarily, yes, but not in this case.
If you allow someone to live in your home in return for that person paying your mortgage, then you must claim the amount paid as rent.
Similarly, if your employer pays your mortgage instead of paying you directly, then you must report the amount paid as wages or salary.
However, if a family member pays without receiving anything in return, then you do not declare it, because you do not pay tax on gifts that you receive from family members. However, the family member who is paying would be required to declare it and might be required to pay gift tax.
If someone pays your monthly mortgage payment for you do you have to declare that as income?
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