My dad is refinancing his house taking 31k out can he write a check to payoff a 18k crdt crd then gift me 13k?

Karyn
My dad is refinancing his house taking 31k out; can he write a check to payoff a 18k crdt card then gift me 13k; his name is on the credit card and I think you can gift someone 13k. Will he have to pay any taxes on any of that. I know he doesnt have to pay the 13k for the gift but what about paying on the 18k credit card; any help would be appreciated. thanks

Sherry
Paying off a credit card has no tax implications at all.You can give gifts of $13k per person per year to an unlimited number of recipients without incurring a Gift Tax liability or being required to file a Gift Tax return. You can also give unlimited gifts of education to an unlimited number of recipients as long as you pay the tuition directly to the school yourself.Since his gift to you is equal to or less than the annual $13k exclusion there is no Gift Tax return filing requirement at all.

Elli
There are no taxes on credit card payments - that is not a gift, that is a debt. And yes he can gift you the 13K without penalty. He gets $12K a year exemption and $1 million lifetime exemption on gifts beyond the $12K a year. I assume he has not hit the $1 million in gifts as of yet.

Bill
One thing that your dad should be aware of is that he can't deduct the mortgage interest on the additional $31K. The amount doesn't go to purchase/improve a qualified residence and can't be considered as investment interest. But he is still probably making a good choice in trading 18% interest for %6.If you don't really need the 13K, have him keep it in the house and then he will have less to pay down. He doesn't want to get trapped by a mortgage in this economy.

Elanor
The annual gift exclusion is now $13, 000.There are no taxes, just risk and interest to pay to refi the house. (If he failed to pay back the loan, then he would owe income tax.)