Cash Gifts and the IRS
As a house flipper, you should be constantly looking for ways to raise money. Friends, family and associates can be a great avenue to get started. However, you will want to be careful on the amount and the terms used for the money you receive. Lets say your grandfather wants to help you get started in your house flipping business. He offers to give you money for this duplex that you just got under contract. This doesn’t mean that he can just write you a check for any amount and of you go. Uncle Sam may want his cut.
The IRS allows an individual to give any other person gifts of up to $12,000 per year tax free. What this means is that your grandfather can give you this amount of money every year and you do not need to pay taxes on this money. You can use this as cash for a down payment on a house, boat or even invest it in the stock market. However, anything over this amount is fair game and could be taxed as much as 45 percent according to Jane Brewer of the accounting firm KAWG&F’s tax department. So before you go off spending grand dad’s bundle, be sure you know the tax implications and prepare accordingly.
