What Are The Tax Implications of Selling a House Below Market Value in GA?

Here’s the situation you’re in: you own a house in Georgia that you want to sell fast. It might be an inherited property in Columbus where the repairs and renovations can cost thousands of dollars. Or it might be an outdated home in the Atlanta area that you don’t want to renovat

Here’s the situation you’re in: you own a house in Georgia that you want to sell fast. It might be an inherited property in Columbus where the repairs and renovations can cost thousands of dollars. Or it might be an outdated home in the Atlanta area that you don’t want to renovate at all. Maybe you want to sell it cheaply to help out a family member.

Before you move forward with a seemingly easy decision, not so fast. There are potential tax consequences that stand in the way of making this happen. Not to mention, the tax implications of selling a house are well below market value and depend heavily on who the buyer is. Suppose you sold the house to family members. That is considered a gift of equity in the eyes of the IRS, which might require filing IRS Form 709 (assuming it exceeds the $19,000 annual exclusion).

Higher capital gains taxes may apply if the buyer inherits a lower cost basis. If you sell the property as-is to a cash buyer like Assured Property Solutions, you might be able to simplify the process. Plus, it also means navigating around the tax implications that could arise should you have gone the traditional route.

The “Gift of Equity”: How the IRS Views Selling a House Below Market Value

If your home is worth $300,000 and you sell it to a family member for less (we’ll say $150,000), the IRS sees it as a $150,000 gift. This is what is called the “gift of equity”. It is considered one of the most misunderstood aspects of selling a house if it’s under the market value. So with that explained, let’s shift gears to Form 709.

Sibling Rivalry: Selling When Heirs Disagree

This is a situation that is common in situations where inherited homes are involved. One sibling wants to sell it fast. The other wants to “keep it in the family” by offering a discounted deal to a relative. That’s where it creates an issue that complicates things. For one, if there are multiple heirs to a property, it can’t be sold without unanimous agreement. Meaning that all heirs must agree (even in writing) to ensure that the sale can go off without a hitch, and by the executor of the estate, who has the legal authority to sell the house.

Now, suppose this home was appreciated since it was inherited or purchased. Capital gains taxes might still be owed. If this were your primary residence, you could qualify for a Section 121 exclusion (which is up to $250,000 for single filers and $500,000 for married couples). Please note that inherited and investment properties are not the same.

The Cost Basis Trap: Why Selling to Family Can Backfire

This part is easy to miss for most sellers. That’s because if you sell a house at a steep discount, the buyer won’t get a clean slate. Instead, they’ll take on a hybrid cost basis, which increases their taxes later on. Here’s an example of what we mean by this:

• You sell a home worth $300,000 for $150,000

• Your relative sells it later for $320,000

Now, the IRS can calculate gains based on the lower basis. The relative you sold the house to could owe taxes on a much larger profit than expected. Can you imagine what began as a favor can turn into a financial burden on their end? That’s not a good result if you think about it.

Whether you’re the one selling the house or if you are a relative who bought a house in such a transaction, you may want to consider a cash buyer who can help you avoid future burdens. As your home buyers in Phenix City, Assured Property Solutions can assist you in selling your house fast without having to worry about tax implications later on in the future.

Georgia Property Taxes: Will the Assessor Care About the Sale Price?

Most buyers assume that if they purchase a property at below market level, their property taxes may drop. That isn’t the case in Georgia. County tax assessors determine the property taxes based on the fair market value of comparable homes, not the discounted sales price. So if the buyer purchases it for $150,000, the county can still assess it at $280,000 or more. Plus, it may also reflect the true neighborhood value instead of the deal they got. This leads to so much confusion and frustration, even after the sale goes through.

The Difference Between “Retail Value” and “As-Is Value”

Most sellers get tripped up in this situation. They might think that if they accept less than what a renovated home sold for down the street, then it might be considered sold “below market value”. That isn’t necessarily the case. The reason for this is that there are two different markets:

• **Retail market:**Includes fully updated homes, staged, listed, and financed

• **As-is market:**Homes that need repairs, sold quickly, typically to investors or cash buyers

So if your house needs about $40,000 in repairs, the true market value won’t be the same as the turnkey home nearby. Nonetheless, this might cause confusion for sellers in the beginning. If the house is being sold as-is, it would be easier to sell it to a cash buyer like Assured Property Solutions.

Why Selling to a Cash Buyer Avoids Gift Tax Headaches

Selling to a professional buyer is considered an arm’s-length transaction. Which means the following:

• Both parties act independently.

• There is no relationship influencing the deal.

• The price reflects the home’s current condition.

So, what it is from the IRS’s viewpoint is that it’s not a gift. It’s actually a fair market sale of an as-is property. This distinction is important because it eliminates the following:

• Gift tax reporting

• Form 709 filings

• Family-related tax complications

Sell Your Georgia House Fast (With Zero Tax Headaches)

If the house needs work and you want a clean exit, layering in family deals and tax complications can make things challenging. The best part about it is that you don’t have to deal with that. Fortunately for you, there’s an easier path that you can take.

Skip the Realtor and the IRS Forms: Sell to Assured Property Solutions

Working with Assured Property Solutions, you have an excellent alternative. This means you don’t have to deal with:

• Repairs or cleanups

• Gift tax confusion

• Drawn-out listing process

• Agent commissions

You can learn more about how it works so you can make an easier decision on working with a seller like Assured Property Solutions. Get a cash offer in Midland or in the surrounding communities and you get a clean financial break, and you’ll be able to get the cash you need. Don’t let tax fears keep you trapped in a house you no longer want. Contact Assured Property Solutions today for a fair, no-obligation cash offer and experience a clean, hassle-free closing.

Conclusion

No need to handle tax implications when you want to sell a home that you don’t want anymore. Assured Property Solutions will have you covered from start to finish. No repairs needed, no taking the “traditional pathways”, or anything else that normal sellers do. Contact us today for more information on how we can assist you.

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