I am a Canadian and American citizen. I have 2 grown children and I would like to help them with a down payment on their first homes. Are there any tax issues with me giving them cash to help with their down payments?
With the recent surge in housing prices, it has become common practice for parents to help their children purchase their first home.
When people consider doing this, they generally do not think about whether or not there are any tax consequences to gifting someone a large sum of money.
Since the cash gift is not being made to a minor (an individual who is under 18) or spouse, in Canada there is no “gift tax”, so there are no tax consequences or forms that need to be filed by the person giving the gift or the person receiving the gift.
If the cash is given to a minor or to a spouse there can be attribution rules.
For U.S. individuals gifting large sums of money is not so simple. Since you are an American citizen you will be subject to “Gift Tax”. In the U.S., cash gifts to individuals that are less than the annual exclusion are not taxed and do not require you to file a Gift Tax Return (Form 709).
The annual exclusion for 2014 is $14,000 per person (i.e. you can give $14,000 to two different people and not be over the annual exclusion). If you gift more than the annual exclusion, you will have to file a Gift Tax Return and report the excess amount. The excess amount is then applied against and reduces your lifetime gift tax exclusion amount. This amount is currently set at $5.34 million.
Your children do not have to file any forms or pay any tax to the U.S.
If you require any further assistance, please contact one of our experienced professionals.
The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.