taxes

Co-signer's daughter can't get home tax credit

Don Taylorq_v2.gifDear Dr. Don,
I want to give my 18-year-old daughter a home that has a loan balance of $50,000. The home is worth about $110,000, which means there's about $60,000 in equity. She has a good job and could afford the house payment, but she has no credit at all. How can she get a home loan? It would be awesome for her to take advantage of the tax credit.
-- JW

a_v2.gifDear JW,
From your letter, I gather that you want to gift your daughter the home but want her to get a loan to replace the current mortgage on the property. If you're worried about her being able to qualify for a loan because she has no credit history, you could consider co-signing the loan with her on the home.

Co-signing the note may not put you in the financial position you were hoping for, but it will allow your daughter to build a credit history. Down the road, she can refinance and re-title the property to complete the gift and take you off the loan.

President Obama recently signed legislation to extend the first-time homebuyer tax credit, and even expand the pool of eligible homebuyers. However, there is some bad news for you. According to the Internal Revenue Service, selling a home to a family member makes the buyer ineligible for the first-time homebuyer tax credit.

 

The IRS publication "First-Time Homebuyer Credit Questions and Answers: Basic Information" lists eight scenarios that render a buyer ineligible for the credit, including the following: "You buy a home from a close relative. This includes your spouse, parent, grandparent, child or grandchild."

 

Even if your daughter can't capture the tax credit, discussing your situation with a real estate attorney and accountant could result in a creative solution that accomplishes much of what you want to achieve in gifting the equity in this home.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.

News alert Create a news alert for "mortgage"

advertisement

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed 4.14%  0.09 4.23%
15 year fixed 3.24%  0.02 3.26%
5/1 ARM 3.50%  0.20 3.70%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.29% --0.00 4.29%
50K FICO-based HELOC 4.04% --0.00 4.04%
100K FICO-based HELOC 3.89% --0.00 3.89%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.79% --0.00 2.79%
48 month used car loan 2.99% --0.00 2.99%
60 month new car loan 3.24% --0.00 3.24%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.98%  0.01 0.97%
2 Year CD 1.17%  0.01 1.16%
5 Year CD 1.77%  0.06 1.71%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.75% --0.00 15.75%
Cash Back Cards 16.45% --0.00 16.45%
Low Interest Cards 10.96% --0.00 10.96%
 
Next
advertisement
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement

Connect with us