You want to exchange your house with your parents’ house in 2022. What do you as a child have to arrange for this home exchange and what does the Tax Authorities think about this? Parents who find their home has become too big and cannot sell their home quickly can exchange their home with a child, but is that possible with closed stock exchanges? And what if there are several children in the family, what does that exchange mean for inheritance rights and taxes? Exchanging a house is the future. Housing site Funda is also experimenting with home exchange.
Home exchange within the family
- Exchanging a house with parents in 2022, home exchange
- How are you going to exchange your house with your child?
- Exchange house and pay rent
- Exchanging a house, transferring a home and the tax authorities
- Gift tax when exchanging a house, what about that?
- You have several children
- Conclusion child and parents exchange house
Exchanging a house with parents in 2022, home exchange
If both a child and the parents have a house, it could be nice if they could exchange their houses with each other. It often happens that parents want to live more quietly or live smaller and then exchanging houses may be an obvious choice. Especially if the parents live a bit large and a child wants a larger house. But is it possible to exchange and how do you do it in a fiscally smart way?
How are you going to exchange your house with your child?
If the exchange is no more than temporarily moving into each other’s house without transferring ownership, there is little to worry about. This is temporarily possible with closed stock exchanges. No rent is paid and you do not have to deregister or register in the BRP (population register, GBA). But if this takes longer, there are a number of points to consider:
- Mortgage interest is not deductible if the house is no longer your main residence. That is not a problem if there is no mortgage, but an additional cost item if there is a mortgage. An exception to this is the case where the house is for sale.
- You will still have to register in the municipal personal administration BRP.
Exchange house and pay rent
You can also exchange each other’s houses without becoming owners by moving and paying each other rent. It is more difficult to do if a house has a mortgage. You then need permission from the bank and the mortgage interest is not deductible during the rental period.
Exchanging a house, transferring a home and the tax authorities
If exchanging a house really involves buying each other’s house with the transfer of ownership at the notary, each person pays 2% transfer tax on the value of the house. You would also have to pay this transfer tax if you were to buy a house from someone else. And there are a number of additional costs:
- The moving costs;
- The costs of transfer at the notary;
- The costs of the mortgage deed;
- Possible appraisal costs;
- Possibly also gift tax.
Gift tax when exchanging a house, what about that?
Parents and children often try to exchange their houses with closed markets, but that is difficult if one house is worth more than the other. In that case, the price is sometimes adjusted downwards and transferred below the actual value. The Tax Authorities pay attention to this. If you sell a house to your child for an amount that is too low, the difference with the actual value is regarded as a gift and your child, as the recipient of the gift, must pay gift tax on it. On the other hand, there may be good reasons why a house sells for less money. The houses have become less valuable since the crisis and the house may require a lot of maintenance. If you want to avoid problems with the tax authorities, but you have doubts about the correctness of the value of the sold house, it is best to have a valuation report drawn up. Moreover, the gift tax above the exemption for a child amounts to ten to twenty percent. That is a lot, but it also means that 80 to 90 percent can be transferred to your child tax-free. In addition, an increased exemption is also possible. Conversely, if a child donates to his parents, it is much more expensive: the tax authorities make buying a house for your parents an expensive affair.
Calculation example of exchanging a house between parents and child
Suppose the value of the child’s house is 200,000 euros. Suppose the value of the parents’ house is 300,000 euros. Suppose you exchange with closed exchanges for 200,000 euros, then every non-starter on the housing market pays 2% transfer tax plus on 100,000 euros minus the annual exemption of 10%. That is 4,000 euros plus 6,000 euros in transfer tax plus approximately 9,500 euros in gift tax. The transfer tax can still partly be offset against the transfer tax. If the child is younger than 40 years old, the gift exemption could increase to more than 106,671 euros in 2022 and exchange for purchase may be largely tax-free. A starter does not even have to pay transfer tax and can therefore benefit from even more savings.
You have several children
If the exchange of houses involves a gift and you have several children, the donation made after your death can be part of the division of the inheritance at their request. If you are at the notary, you can ask them how you can best structure the transfer and what adjustments are required in your will.
Conclusion child and parents exchange house
Exchanging a house may seem obvious, but it can also be more expensive than you expected if you also have to pay gift tax. A good notary can tell you how part of the transfer tax can be offset and whether adjustments are needed in your will. Housing site Funda will make it possible to exchange houses on a large scale. It gives people the certainty that they will not be left with an unsold house and thus stimulates the buying and selling of houses in our country.