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Frie, Arndt & Danborn Blog

Real Estate – Joint Tenancy #3 – Joint Tenancy and Taxes

by Frie, Arndt & Danborn

Joint Tenancy
How are taxes affected by joint tenancy?
The laws of estate and gift taxes are considered to be very complicated. You should consult with an attorney or Certified Public Accountant. Estate and gift taxes are being evaluated for changes effective Jan. 1, 2013.

Estate tax—Owning property in joint tenancy does not avoid estate taxes, but simply allows for the passing of title to the surviving joint tenants without having to go through the probate process. If the joint tenants are not spouses, the property value must be included in the decedent’s estate value, which, depending on the total value, may be subject to estate tax liability.
Income tax—All joint tenants are ordinarily expected to show their share of any income derived from property owned in joint tenancy, and declare their respective share on their income tax return and to prorate taxes and other deductions.

Gift tax—Depending on who the joint tenants are, there may be gift tax implications for transferring or tilting property in joint tenancy. A person may make up to $13,000 per person in 2011 (and subject to a lifetime cap). A person may make a gift of up to $13,000 per individual without being required to file a gift tax return. However, gifts above that amount made to anyone other than a spouse require the filing of a gift tax return and may subject the estate to gift tax liability.

Can joint tenancy property be converted to individually owned property? 
Any of the joint tenants can change how the property is titled by mutual agreement or by convening the property to a third party. However, it is important to note that if there are only two joint tenants and one relinquishes their right, there may be gift tax implications. Consult with an accountant to determine any tax implications.
Any attorney in our office would be glad to help you with your real estate matters.  Please call us for assistance.

This article is an excerpt from a pamphlet published by the Colorado Bar Association.