Are there any rules or laws on in-law suites that have adjusted taxes if the inhabitant was tax-exempt prior?

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julmacinnis Asked July 2018

Are there any rules or laws on in-law suites that have adjusted taxes if the inhabitant was tax-exempt prior?

Last year we built a gorgeous in-law suite for my mom. She paid for it from part of the proceeds of her house - cost was around $190K (my dad has been gone 20 years). We just received a reassessment and the new mortgage went up about $500 (property tax + insurance). We are in pricey Fairfax County. In her old house, she was tax-exempt. I presume with the in-law suite this falls on us now? I wasn't sure if there are any rules or laws on in-law suites that have adjusted taxes if the inhabitant was tax exempt prior?

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score 1 · Answer 1

GA, no interest if mom is not on deed. Gifted funds of value of improvements for Medicaid purposes if mom not on deed at the time. My husband’s grandma gave him money to help with our house down payment, but no financial interest in house if not on deed or mortgage.

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score 0 · Answer 2

How is title vested? In you and your husband's name? If so, yes, the taxes will be your responsibility.

Was this discussed before the addition and any cost sharing considered? You might want to discuss this with a real estate attorney as, if I understand correctly, the proceeds of her house funded the addition, so she does have a financially vested interest in the house.

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score 2 · Answer 3

You will want to ask the CPA about the $190K gifting if she ever needs Medicaid within 5 years from now. Yes, it was spent on her care, but it built a bigger part of your house not a house that she owned. That move might come back to bite her.

If the CPA says the money she gave you to build the suite is a gift, then she'll have some gifting tax to pay from the other part of her profit from selling her former house. That must be a sweet suit for $190K!

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score 4 · Answer 4

No taxes are based on property owner, not inhabitant. 2018 changes didn’t help property tax owners, and improvements of $190k will be taxed.

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score 3 · Answer 5

Julmacinnis, I would believe that since your Mom doesn't own the house, and had "gifted" to you the cost of building the in-law suite, that the new taxes and insurance will fall on your shoulder's. Your house has gained in value from the improvements thus you will benefit when the time comes to sell.

You may want to verify this with a CPA as tax laws are always changing.

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Are there any rules or laws on in-law suites that have adjusted taxes if the inhabitant was tax-exempt prior?

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