Legal Question in Real Estate Law in Maryland

Re: Father gifting his house to me

When property is received by gift, the value in excess of $12000 to any one person is subject to a gift tax. However, under the current tax law, there is an exemption from federal estate taxes of $2million in property either donated or passed through the estate of the giver. The state tax exemption is $1million. So if your father's property is under these limits, and is likely to remain so, ultimately this transaction wouldn't result in any tax.

The other issue you must consider is the tax on capital gains when you sell the house. If you receive it as a gift, you assume your father's basis in the house, which is probably quite low (what he paid for it plus any improvement). So when you sell it, you will pay a higher tax. If you purchase the house from him, the purchase price becomes your basis, so the profit on sale is lower, therefore less tax. You will pay taxes to transfer the property, but that should be less than the capital gains tax.