Q: Are there any taxes or fees due if I transfer my house to my son instead of selling it to him?

A: There are likely no taxes due if you gift instead of sell your home to your son. You could, in fact, avoid capital gains tax. Transferring the home to your son is considered a gift. Currently, you can gift up to the federal estate and gift tax exemption amount of $12.06 million. The value of the home on the date of transfer would reduce your lifetime gift and estate exemption, so there will be no gift tax unless the value of the home and your other lifetime gifts exceeds that amount. This means if you gift a home valued at $1M, you will have $11.06 million left in the lifetime gift and estate exemption. An IRS gift tax return will need to be filed.

However, there is another tax you may want to avoid: capital gains tax! Consider how much you initially paid for the home – that is your “basis” in the property. If you were to sell it during your lifetime, you would pay taxes on any gain in value – minus your $250,000 exemption because it is your primary residence. By gifting the property, your son inherits your same basis in the property. If your son sells the property, he will have to pay a taxable gain on the increase in value. If your home appreciated significantly from date of purchase, your son could incur close to 40% in capital gains tax.

But, if you pass away owning the home, the property gets a step up in basis to fair market value on date of death. This means that your son could then sell the home without incurring any capital gains if he inherits it at your death. This stepped-up basis tax provision applies to stocks and bonds as well and is popular with both democrats and republicans.

There are minor fees for changing a deed. You would transfer your house to your son by signing and recording a deed and transfer tax forms with the county clerk. The fees to record the deed differ from county to county, ranging from a couple hundred dollars to a thousand dollars.

Since capital gains could be reason alone to wait before transferring the home to your son, it is crucial to consult with an experienced estate planning attorney or accountant. Additionally, it is important to have an experienced trusts and estates attorney properly prepare the Deed. A simple mistake in the deed could create issues in the chain of title. A transfer could be the right answer, but make sure you have considered all the implications.