Match

Hi all

I'm well and truly settled here now and I'm looking to make a house purchase.
My parents in the UK have kindly offered to help me out with the deposit, but before I take their money I wanted to check that there weren't any tax implications for THEM if they do this.

Everything I read suggests that I do not have to pay any tax on receiving a gift of this nature from abroad, but I don't want to burden them with additional fees when they are offering to help me out...

Has anyone been through a similar situation?

Thanks!

GeoffM

Well, advice offered to me for the same thing, albeit paid back, was that I didn't need to declare it for tax purposes, and no mention was made for their tax situation.

rpjs

No, US gift tax is paid by the donor, and so as your parents aren't liable to US tax, they won't have to pay it.

(Unless they are somehow liable to US taxation through being US citizens themselves of course.)

Match

Thanks Geoff, Roy. Good to know!

(Both parents are British through and through...)

King Gimp

We recently bought a house using some gifted monies for part of the deposit - the bank didn't want to believe the money was a gift until we had proof mailed over from the UK. My folks had to supply a notarized letter explaining. Taxman wasn't interested at either end. Good luck.

Giantaxe

Remember that there could be UK inheritance tax consequences for your parents depending on when they subsequently are deceased and the size of their estate.

sir_eccles

Yes, mortgage lenders are very suspicious of sudden large deposits of cash. You may need to show where it is from.

As long as they live for seven years more they're ok I think.

Tarkak9

In short, as it was explained to me from our fam accountant -

You are correct there is no tax you have to pay on the gift you receive from (parents). Nor is there any reporting requirement on your part as/if they are a US Citizen. (they'll be the ones who pay and report on their US taxes, if USC's)

If you received a gift from a non resident alien then you would have to complete Form 3520 to report the gift but again no actual tax would be due on the gift.

Yes, underwriters will more than likely want a gift letter or similar document stating where you got it from, so liaise with your lender what they want and for how long the funds may need to be in your possession.

sir_eccles

I thought you only needed Form 3520 if it was over $100k?

Tarkak9

maybe/maybe not .... above was what was written to me. I'd imagine that, if you don't declare it accordingly etc, and uncle sam were to find out, one probably runs the risk of paying back tax if deemed by them as income, as well as penalties and interest. ....

- The IRS .... overlooked as "THEIRS" - ....

MsElui

yeah only thing you will have to argue with is proving where the money came from. its not a no-no - you just have to be able to demonstrate the origin for anti money laundering rules etc.

Pulaski

Make sure you tell the bank the truth. When my in-laws bought their current home they used some money we paid them as part of the deposit. The money was part (final) repayment of a loan they had made to us. The bank loan officer tried to tell us that "it would be easiest to fill out the form reporting it as a gift". It absolutely was NOT a gift and after all the shinanigans the mortgage business got into I was shocked that we were being solicited for a fraudulent declaration as to why Mrs P and I (re)paid the money to her parents.

GeoffM

And, in our case, explain to the bank, of all places, that the UK uses a different currency to the US so the pound<->dollar numbers would be different at each end of the wire transaction. Very much an exercise in "how high" when they say "jump".

Match

Thanks all. Have been working with the bank on this so we have gift letters etc ready to go, so hopefully we're covered on that front.

Incidentally from my browsings, I believe form 3520 does have to be filled in every time, but it's more for informational purposes and doesn't affect tax etc until you have a large amount (perhaps the 100k mentioned) or $5m or so lifetime.

MMcD

Good luck to you....

Hope you find (have found?) a great house