If there are two unmarried people on the title and one has a mortgage while the other pays the mortgage is this considered taxable income to the one with the mortgage
Posted by in UncategorizedIf there are two unmarried people on the title and one has a mortgage while the other pays the mortgage is this considered taxable income to the one with the mortgage?
No, this does not result in income as long as there is no obligation of the person to pay the mortgage of the mortgagor. For instance, if person B is paying the mortgage because person B owes A money, person A would report income. However if B is paying the mortgage as a gratuitous transfer, this is a gift to A to the extent that B is adding equity in the house to A. If the title is 50-50, the mortgage payments result in a gift in the amount of 50% of the payment.
Paying the mortgage just to be nice constitutes a gift. Gift taxes only apply if the taxpayer’s unified credit is used up. The unified credit or applicable exclusion amount is 3.5 million dollars in 2009, and it is expected to be reduced to $2 million dollars in 2010 (although the applicable exclusion amount on the books as of today us unlimited in 2010, but Obama’s administration has proposed to reduce it to $2 million.)
So, unless you have more than $2 million dollars to give away during your life and when you die, no gift tax will be incurred. And, unless you owe the other person on the title money, the payment of the mortgage will not result in income to the other person.