Family member considering gifting me a large sum of money—what would you do?
Posted: Mon Feb 07, 2022 1:35 pm
Hello and preemptive apology if I've missed anything in the archives or for any possible misunderstandings. I've already posted the following on the JapanFinance sub-reddit but am posting here as well to gather as much good advice as possible.
I am a US citizen in my early 40s with a permanent residency visa in Japan and who has lived here (Tokyo) for roughly 20 years. I am, I understand, an "unlimited taxpayer" with respect to Japanese gift tax.
My mother is considering gifting me around $200,000 (currently approximately ¥23 million) with the understanding this would be used either to help purchase a home in Japan or the US, or to invest (I have a US Vanguard account I opened many years ago and which I regularly contribute to). She has already made a similar gift to my sister who lives in the US so we have at least a nominal understanding of what taxes may be incurred by this. Our questions, and the reason for my post, are in regard to Japanese taxes.
Options I've thought of (and discovered) so far:
1. Receive this money as a straight gift. My understanding is that the annual gift exemption is ¥1.1 million, so this option would incur the largest financial penalty, as it were, unless the money were trickled to me over the next 10+ years.
2.. Consider this money as part of (all of?) an early inheritance as my mother is over 60 years of age (information from https://taxsummaries.pwc.com/japan/indi ... ther-taxes). In this case gifts of up to a total of ¥25 million would be exempt from gift tax.
3. Specifically earmark this gift for a housing purchase. In that case, if I'm understanding https://www.nta.go.jp/taxes/shiraberu/t ... u/4508.htm correctly, there's an exemption of ¥15 million if the money were to be used for the purchase of a new low energy / energy efficient home or ¥10 million for the purchase of a new non-energy efficient home; or ¥10 million exemption for the purchase of a used energy efficient home or ¥5 million exemption for the purchase of a used non-energy efficient home.
4. Yet another option (as explained in https://old.reddit.com/r/JapanFinance/c ... s/gvvvvtq/) would be for my mother to share in the ownership of a purchased home, thereby completely avoiding the issue of gift tax.
5. A variant of the above option would be for my mother to purchase a share of a home and then gift her share to me sometime in the future, taking advantage of the difference in market price and taxable value at that time.
6. I suppose a final option would be to simply use all of the money to further contribute to my Vanguard account and not report the gift / early inheritance to the Japanese IRS. That's not an option I'm considering, however.
My questions:
1. Is my understanding of the possible tax ramifications and potential options above correct? Is there anything I'm missing?
2. What would you do if you were in my situation? I like my life in Japan but I'm not sure I see myself retiring here, so ideas/suggestions that include life outside of Japan are also welcome.
Note that I fully intend to speak with a tax accountant specializing in inheritance tax in addition to my own research. Thank you!
I am a US citizen in my early 40s with a permanent residency visa in Japan and who has lived here (Tokyo) for roughly 20 years. I am, I understand, an "unlimited taxpayer" with respect to Japanese gift tax.
My mother is considering gifting me around $200,000 (currently approximately ¥23 million) with the understanding this would be used either to help purchase a home in Japan or the US, or to invest (I have a US Vanguard account I opened many years ago and which I regularly contribute to). She has already made a similar gift to my sister who lives in the US so we have at least a nominal understanding of what taxes may be incurred by this. Our questions, and the reason for my post, are in regard to Japanese taxes.
Options I've thought of (and discovered) so far:
1. Receive this money as a straight gift. My understanding is that the annual gift exemption is ¥1.1 million, so this option would incur the largest financial penalty, as it were, unless the money were trickled to me over the next 10+ years.
2.. Consider this money as part of (all of?) an early inheritance as my mother is over 60 years of age (information from https://taxsummaries.pwc.com/japan/indi ... ther-taxes). In this case gifts of up to a total of ¥25 million would be exempt from gift tax.
3. Specifically earmark this gift for a housing purchase. In that case, if I'm understanding https://www.nta.go.jp/taxes/shiraberu/t ... u/4508.htm correctly, there's an exemption of ¥15 million if the money were to be used for the purchase of a new low energy / energy efficient home or ¥10 million for the purchase of a new non-energy efficient home; or ¥10 million exemption for the purchase of a used energy efficient home or ¥5 million exemption for the purchase of a used non-energy efficient home.
4. Yet another option (as explained in https://old.reddit.com/r/JapanFinance/c ... s/gvvvvtq/) would be for my mother to share in the ownership of a purchased home, thereby completely avoiding the issue of gift tax.
5. A variant of the above option would be for my mother to purchase a share of a home and then gift her share to me sometime in the future, taking advantage of the difference in market price and taxable value at that time.
6. I suppose a final option would be to simply use all of the money to further contribute to my Vanguard account and not report the gift / early inheritance to the Japanese IRS. That's not an option I'm considering, however.
My questions:
1. Is my understanding of the possible tax ramifications and potential options above correct? Is there anything I'm missing?
2. What would you do if you were in my situation? I like my life in Japan but I'm not sure I see myself retiring here, so ideas/suggestions that include life outside of Japan are also welcome.
Note that I fully intend to speak with a tax accountant specializing in inheritance tax in addition to my own research. Thank you!