{"id":238993,"date":"2023-06-06T15:21:27","date_gmt":"2023-06-06T13:21:27","guid":{"rendered":"https:\/\/aq-acentor.com\/?p=238993"},"modified":"2023-06-06T15:21:28","modified_gmt":"2023-06-06T13:21:28","slug":"how-to-give-money-to-your-child-to-buy-a-property","status":"publish","type":"post","link":"https:\/\/aq-acentor.com\/en\/how-to-give-money-to-your-child-to-buy-a-property\/","title":{"rendered":"How to give money to your child to buy a property"},"content":{"rendered":"\n

Buying a property<\/a> can cost a fortune. Not only do you have to pay for the property, there are also taxes and notary fees on top<\/strong>. Bear in mind that a mortgage<\/strong> makes this easier, but it doesn\u2019t cover all the costs, as banks usually only grant 80% of the property\u2019s value<\/strong>. Many parents wonder whether they can help their child financially in order to buy a house<\/strong>. Here\u2019s a rundown of everything you need to know in this article.<\/p>\n\n\n\n

H2: Can you give your child money to buy a property?<\/h2>\n\n\n\n

If you’re wondering whether you can give money to your child to buy a property<\/strong>, the answer is yes. Families commonly lend each other money<\/strong> or give gifts inter vivos<\/strong>, however you need to be careful, as they entail certain tax obligations<\/strong> that you\u2019ll need to be aware of beforehand.<\/p>\n\n\n\n

As we stated earlier, buying a house is a big financial outlay. It isn\u2019t enough to save up<\/strong> to pay the earnest-money deposit or make the down payment; you must also meet the requirements<\/strong> before being awarded a mortgage, and have enough money for the other related<\/strong> costs. <\/p>\n\n\n\n

You\u2019ll need to pay for the public deed, taxes<\/strong> (VAT or ITP) and notary fees. What\u2019s more, supply contracts need to be taken out for the property <\/strong>(electricity, heading, water). It is possible for parents to give money to a child to buy a property, and there are two ways to go about this: Look into it beforehand to avoid any surprise taxes.<\/p>\n\n\n\n

Gift: How much money can my parents give me?<\/h2>\n\n\n\n

The first way is a parent-to-child gift to buy their primary residence<\/strong>. This is the most common way. The parent-to-child gift to buy a house is also included in civil contracts<\/strong> and, like all contracts, it\u2019s also subject to rights and obligations. In this case, this money is given without it having to be paid back<\/strong> further down the line; in other words, it\u2019s a gift. <\/p>\n\n\n\n

Nevertheless, although a child might be given money to buy a house and they aren\u2019t expected to pay the money back in the future, the tax obligations that the gift entails need to be complied with<\/strong>. The corresponding taxes<\/strong> (gift tax), that are managed by the Autonomous Community<\/a> in which the money, in the form of a gift, is given<\/strong>. We\u2019ve already mentioned that the gift is a contract and must therefore also be made official<\/strong>.<\/p>\n\n\n\n

In order to make the document official for all tax-related intents and purposes, it must be executed before a notary public<\/strong>.<\/p>\n\n\n\n

How much money can you give a child without having to pay taxes?<\/h3>\n\n\n\n

There is no minimum amount<\/strong>, but it\u2019s important to know that, provided this gift has been made official, (which is the right thing to do to avoid tax complications), a tax must be paid<\/strong>. This tax is subject to a tax rate applied to the taxable base, in other words, to the amount gifted. The percentage of the tax rate<\/strong> ranges from 7.65% to 34%. <\/p>\n\n\n\n

Once it is applied, the tax payable<\/strong> is calculated and stipulated according to a multiplier coefficient<\/strong>. This coefficient depends on the group to which the donee (the recipient of the gift) belongs and is determined according to age and degree of kinship<\/strong> (parent to child or vice versa). The tax rate ranges from 1 to 2.4%.<\/p>\n\n\n\n

Although the figures may seem high, don’t worry, as there are different discounts and reductions available<\/strong>. <\/strong><\/p>\n\n\n\n

How to give money to a child without declaring it<\/h3>\n\n\n\n

Can you give money to a child to buy a house without declaring it? You should be aware that the gift is liable for tax<\/strong>, but you can benefit from a number of discounts, meaning you don\u2019t have to pay tax. It all comes down to where the gift is made.<\/strong> As we\u2019ve already mentioned, the tax is of an autonomous nature and it is the communities that are responsible for managing it. <\/p>\n\n\n\n

Many can avail of reductions and discounts, such as in Madrid<\/strong>, where reductions of up to 100% aren\u2019t unheard of. Madrid’s case is rather straightforward: in order to benefit from the reductions, the gift needs to be formalised before a notary and the source of funds must be accredited <\/strong>when the gift is made in cash. <\/p>\n\n\n\n

Furthermore, to get up to a 100% reduction, no more than \u20ac250,000 <\/strong>can be handed over and the amount handed over must go towards buying a home. In addition, the property must be purchased within one year.<\/strong> Other autonomous regions that also offer significant tax reductions for gifts between parents and children are Andalusia, Cantabria, Aragon, Galicia and Murcia<\/strong>.<\/p>\n\n\n\n

In the case of La Rioja, Catalonia, the Balearic Islands and Castile-La Mancha<\/strong>, allowances for gifts are subject to the degree of kinship between the parties and the amount given<\/strong>. This entire process also applies the other way around.<\/p>\n\n\n\n

H2: How is a parent-to-child home loan taxed?<\/h2>\n\n\n\n

A loan<\/strong> can be given instead of a gift; in other words, the money is given with a view to the child paying pack his\/her parent(s) the amount lent to buy their home. Just like the gift, the loan is also subject to tax<\/strong>. This is known as a family loan<\/strong> (children can also lend to their parents) and is characterised by the following features:<\/p>\n\n\n\n

  • No interest charged.\u00a0<\/li>
  • Grace periods.<\/li>
  • Flexible repayment terms.<\/li><\/ul>\n\n\n\n
    \"How<\/figure><\/div>\n\n\n\n

    Just like the gift, the loan is a contract<\/strong> and is also subject to rights and obligations between the parties and the public administration. The contract must be formalised<\/strong> and this document should set forth:<\/p>\n\n\n\n

    • The amount<\/strong> given by way of a loan.<\/li>
    • The interest<\/strong> paid on money borrowed or the absence of such interest. <\/li>
    • Repayment deadlines<\/strong> and agreed instalments. <\/li>
    • Possible repayment extensions <\/strong>and early repayments<\/strong>. <\/li>
    • Guarantees.<\/strong> In other words, steps to be followed if the loan is not repaid. <\/li><\/ul>\n\n\n\n

      Just like a gift, a parent-child loan is subject to tax obligations<\/strong>. Nevertheless, in this case, they’re only borne by the borrower<\/strong>, in other words the person who receives the money. From the date on which the contract is signed, the Inland Revenue<\/strong> grants a period of 30 days to file the tax return, as they are deemed to be onerous transfers of property<\/strong>. The borrower must file the Tax on Property Conveyances and Documented Legal Acts<\/strong> but, as they are tax-exempt, there\u2019s no need to pay anything to the Inland Revenue. <\/p>\n\n\n\n

      In other words, the tax return<\/strong> must be submitted by filling in form 600<\/strong>, accompanied by a copy of the loan contract. However, no amount needs to be paid. The loan must also be declared in the Income Tax Return.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Buying a property can cost a fortune. Not only do you have to pay for the property, there are also taxes and notary fees on top. Bear in mind that a mortgage makes this easier, but it doesn\u2019t cover all the costs, as banks usually only grant 80% of the property\u2019s value. Many parents wonder […]<\/p>\n","protected":false},"author":1,"featured_media":429523,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[548],"tags":[576],"class_list":["post-238993","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate","tag-real-state"],"acf":[],"yoast_head":"\nHow to give money to your child to buy a property | AQ-Acentor<\/title>\n<meta name=\"description\" content=\"Find out how to help your child financially with the best tips to make their dreams come true. 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