Can You Sell Your Connecticut Home to Your Kid for $1, You Need to Know

You've reached a point in your life when you want to downsize.

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Maybe you'd like to unload your Connecticut home? You might even want to sell it to your child for $1 to make their journey that much easier. Here are some things to know.

Can I sell my home to my child for $1?

Yes. You can sell your home for any price you want.

Will there be any unforseen costs? 

Probably, The IRS may try to stick it to you and hit you with a massive gift tax. According to The Balance Money:

"The Internal Revenue Service (IRS) takes the position that you're making a $199,999 gift if you sell for $1 and the home's fair market value is $200,000, even if you sell to your child.1 You could owe a federal gift tax on that amount. 

You might think that "selling" your home to your child will help you avoid estate taxes down the road at the time of your death, but the IRS is a step ahead of you. The federal estate tax and the gift tax go hand in hand. The major difference between them is your timing. When are you transferring ownership of assets?

You can pay a gift tax on the transfer now, or your estate can pay an estate tax later. Both taxes share the same federal exemption from taxation at the end of the day. Whether you'll actually have to pay a tax depends on the extent of your assets and how generous you are over the course of your lifetime."

What are the Connecticut Specific Issues?

#1 - If you sell your house in Connecticut at a rate lower than the fair market value, the state will consider that a gift.

#2 -  The person giving the gift, is resposnible for filing and paying taxes on the gift.

The Connecticut State Department of Revenue Services lays out everything you'll need to know in IP 99(9) A Guide to the Federal and Connecticut Gift Taxes

CT Department of Revenue Services Example:

What are Some Examples of Gifts of Real Property? Whenever you transfer title to real estate and you receive less than the fair market value of the property (in cash or other type of payment) and the transfer is not the result of a sale in the regular course of business, you may be making a taxable gift.

EXAMPLE 1: John owns a vacant lot. He conveys title to the property to his son. John does not receive any money or other type of payment from his son. John has made a gift to his son equal to the fair market value of that lot. John is allowed to deduct an annual exclusion of $10,000 from the value of gifts made to each person. If the fair market value of the lot is $25,000, the amount of the taxable gift is $15,000.

Gift $25,000

Annual Exclusion ($10,000)

Taxable Gift $15,000

Trust me, I am as dissapointed as you are with this information. The government is a casino and the state holds all the cards. Look, I was in no danger of being gifted a home but I like to dream. I'd love to charm a 90 year-old CT Billionaire and get a house "on-the-arm" but it's starting to sound like a real headache.

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