In honor of the start of the new tax season, I thought it would be apropos to break out an edition of the Tax Mailbag. The topic for this week is home ownership. These are a collection of questions I’ve received from clients and readers. If you have a question you’d like to submit, email me at [email protected].

Question: We would like to give my son and daughter-in-law some money to help with a down payment on a home. Is the most we can give $14,000 without triggering a gift tax return?

Answer: You can actually give up to $56,000 each year before you need to file a gift tax return. The $14,000 limit is per giver to each recipient. So both you and your spouse can each give $14,000 to your son and another $14,000 to your daughter-in-law. It’s best practice to write four separate checks for $14,000 so you have proof to the IRS that a gift tax return is not necessary. You can do this each calendar year. So in theory, you can give your children $56,000 on December 31 and another $56,000 on January 1, for a total of $112,000 within a 24-hour period. So you end up with a house for your children and no gift tax returns to deal with. The only downside is you’re out $112,000.

Question: I was scrolling through my Facebook feed, and somewhere in the middle of the ridiculous/crazy posts I actually noticed something interesting. I saw someone post that President Trump may get rid of the mortgage interest tax deduction. Is this true?

Answer: The short answer is no, it’s not true. He is proposing to raise the standard deduction to $30,000 for married couples so more taxpayers would not itemize their deductions and have a need to deduct the mortgage interest. Time will tell whether this will happen, so I wouldn’t spend too much time focusing on it yet.

But you bring me to a more interesting topic, and that is the influx of crazy people on Facebook. The question I find myself pondering is: Does Facebook make people crazy or do crazy people just flock to Facebook? This is essentially the chicken and the egg conundrum for the 21st century, and I don’t have an answer. But this has a direct impact on all of our lives, because we want to know whether we’ve been friends with insane people all of our lives or social media just brings out the worst in some people. The same goes for those people that just post random thoughts that come to their head. Have they always been telling me things I don’t care about or have they been waiting decades for a public forum to finally disclose the details of their morning commute? The world may never know the answer to such complex questions.

By the way, if you don’t have any clue what I’m talking about, it’s probably a sign you should check your Facebook postings. You may be blocked by more friends than you care to know.

Question: We just knocked down our home (property taxes were approximately $10,000) and built a new home on the lot. Our property taxes were just reassessed for $24,000. Can we deduct the full amount?

Answer: I’m gonna take a flyer on this and assume your new construction home is in Bergenfield, where the average age of a home is now 5.5 months. But that’s really irrelevant to this. For federal tax purposes, you may deduct the entire portion of your property taxes. New Jersey differs on this and allows only a $10,000 max for the property tax deduction on your NJ state tax return.

Question: I would like to help our children buy a home. They can afford the monthly mortgage payments but they cannot qualify for a loan. This means I need to get the mortgage in my name. Can my children get the mortgage interest deduction on their tax return if the loan is in my name?

Answer: Yes, they can still get the deduction but there’s a few more steps involved than usual. They must be able to show they are the “equitable owners” of the home. Equitable ownership and legal ownership are two different concepts under the law.

To create equitable ownership, your children should: (1) occupy the home, (2) pay the mortgage directly to the lender (payment should not come from you), (3) pay all home expenses, such as insurance, repairs, taxes etc., (4) contribute as much money towards the down payment as possible and (5) draft a legal document outlining their ownership rights in a written contract with you, the legal owner of the home.

Form 1098 will be in your name, but your children can get the deduction on their tax return. They should include an explanatory statement with the return that states they paid the full amount of the mortgage interest and list the name and address of the person that received the 1098, which is you.

By Daniel Magence, CPA, Esq.

 Daniel Magence, CPA, Esq. is a principal at Pristine CPA Solutions, LLC (www.pristinecpa.com). Pristine CPA Solutions offers tax and accounting services to individuals and businesses of all sizes, whether it’s tax returns, bookkeeping, payroll services or personal income budgeting. He can be reached at [email protected] or 201-326-6908 if you have any questions or comments, or are interested in using Pristine CPA’s services. Feel free to contact us for a free consultation.