Dear Liz: My wife and I have purchased a few properties over the years and now we would like to give these properties to our children. I’ve read that the best way to gift properties is to wait until we pass away, which sounds terrible.
Is there any way to transfer or gift properties without paying a huge amount of taxes?
Answer: Yes, although you’d likely be shifting the tax bill to your kids.
Currently you have to give away over $13 million in your lifetime to owe gift taxes. But if you transfer the properties to your children during your lifetime, they will also get your tax basis in the properties.
That means if they sell, they’ll owe taxes on the appreciation that’s occurred since you bought the real estate. If you bequeath the properties at your death, by contrast, the properties get an updated value for tax purposes and the appreciation that occurred during your lifetime isn’t taxed.
Gifting the properties may still be the right choice, but consider talking to an estate planning attorney and a tax pro before proceeding.
Property sale affects Social Security allocation
Dear Liz: Due to capital gains on the sale of a property, my monthly Social Security check is impacted by IRMAA, the income-related monthly adjustment amount for Medicare.
Therefore not only do I not receive the recent cost-of-living increase, but my benefit substantially decreased.
My question is: After a year will my monthly benefit go back to my most recent benefit, or to the increased amount I would have received without the IRMAA deduction? If the former, it seems like I lose forever.
Answer: You don’t lose forever, fortunately.
You did receive the most recent inflation increase in your Social Security benefit, but it was more than offset by the increase in your Medicare premiums. Medicare premiums are based on your income two years previously, so this year’s IRMAA was based on your tax returns from 2022. If your income went back to normal last year, then the IRMAA surcharge you’re experiencing should disappear next year.
More advice
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.