Tax implications when selling my mom's house with power of attorney?

Thank you for explaining! She's lived there for about 15 years, so that's good to know about the primary residence exclusion. The house was purchased for around $185,000 and we're listing it for $375,000, with about $160,000 left on the mortgage. We did renovate the kitchen about 6 years ago for roughly $30,000. Would the gift tax situation still apply if I'm using her power of attorney? I'm not entirely clear if that changes anything tax-wise when I'm managing her finances.

Yes, the primary residence exclusion would definitely apply in her case since she's lived there well beyond the 2-year requirement. Based on your numbers, her cost basis would be approximately $215,000 ($185,000 purchase + $30,000 kitchen renovation), so if it sells for $375,000, the capital gain would be about $160,000 - well under the $250,000 exclusion amount. The power of attorney gives you authority to act on her behalf, but it doesn't change the tax implications. If you move money from her account to yours, it's still considered a gift from her to you for tax purposes. As her agent under the POA, you have a fiduciary duty to act in her best interests, so you should document why these transfers serve her interests. Some POAs specifically authorize gifting, but if yours doesn't, you might want to consult with an elder law attorney.

Did they give you any specific advice about how to handle the proceeds? I'm in a similar situation with my aunt's house (I have POA) and I'm nervous about moving money between accounts because I don't want to create any tax problems for either of us.

How detailed was the advice? I've tried other services before that just give generic information you could find on Google. Did they actually look at your specific documents or just give general guidelines?

Yes, they gave me specific advice about handling the proceeds. They recommended setting up a separate account specifically for the house sale money that's still in my dad's name, but that I could manage with the POA. This creates a clear paper trail showing I'm not commingling funds. They also explained exactly what documentation I needed to maintain if I did need to transfer money to my personal accounts. They provided very detailed advice based on my actual documents. They analyzed the specific language in my POA to confirm what financial powers I had, reviewed the deed to calculate the exact cost basis, and even looked at my home improvement receipts to determine which ones qualified to increase the basis. It was definitely customized to my situation, not generic info.

How exactly does this service work? Do they somehow hack the IRS phone system? Seems weird that they can get through when no one else can.

Sounds too good to be true honestly. I've tried calling the IRS multiple times about my mom's tax situation and always give up after being on hold for hours. You're saying this service actually got you through in 15 minutes? What's the catch?

It's not hacking the system - they use automated technology to navigate the IRS phone tree and wait on hold for you. Once they have an agent on the line, they call you and connect you directly to that agent. No magic, just clever technology that does the waiting for you instead of you having to sit by your phone for hours. There's no catch except that it's a paid service. But considering I had spent probably 8+ hours trying to get through on my own (time I could have been working or doing literally anything else), it was completely worth it. The IRS agent I spoke with was incredibly helpful once I actually got connected - I just needed a way to actually reach them, which is what Claimyr provided.

I just double-checked the POA document and you're right to bring this up. Mine does have a clause about gift-giving authority, but it specifies "gifts that are consistent with prior giving patterns" - my mom hasn't made large gifts to me in the past, so I'm not sure this would qualify. Would keeping detailed records of how I use the money (if it's all for her care) be sufficient, or should I look into getting the POA modified?

Based on the language in your POA, I'd be cautious about transferring large sums directly to your account. The "consistent with prior giving patterns" limitation is pretty common and could cause problems if you suddenly transfer a large amount from the house sale. I would recommend setting up a separate account that's still in her name that you manage with the POA, rather than transferring to your personal account. This creates a clear separation and paper trail. Keep meticulous records of any withdrawals you make for her care. If you do need to transfer money to your account for convenience in paying her expenses, do smaller transfers that are clearly tied to specific care needs rather than one large lump sum. If you anticipate needing broader gifting powers, consulting with an elder law attorney about modifying the POA might be worthwhile, especially if your mom still has capacity to execute a new document.

What kinds of home improvements can be added to the cost basis? We replaced the roof on my father's house about 5 years ago and did some bathroom renovations. Do those count?

Yes, both of those improvements would typically count toward increasing the cost basis! Major home improvements that add value to the property or extend its useful life can be added to the basis. This includes things like: - Roof replacement (like yours) - Bathroom/kitchen renovations - HVAC system upgrades - Flooring replacement - Additions to the home - Landscaping improvements The key is that they need to be capital improvements rather than just regular maintenance. So replacing a roof would count, but patching a small leak probably wouldn't. Make sure you have receipts and documentation for both improvements - the IRS will want to see proof of the costs if they ever question the basis calculation. Keep in mind that some improvements might need to be depreciated over time rather than added all at once to the basis, but for a primary residence sale, most improvements can be included in the cost basis calculation.

This is such an important point that I wish I had known earlier! I'm currently helping my grandmother with her finances through a POA, and we just sold her condo last month. I had no idea that the sale still needed to be reported even if no tax is owed due to the exclusion. I've been doing her taxes myself for the past few years since they're usually pretty straightforward, but you're absolutely right that a home sale adds complexity. Between calculating the correct basis, documenting all the improvements over the years, and making sure I report everything correctly while acting as her POA, it feels like a lot of responsibility. Do you have any recommendations for finding a tax professional who has experience with POA situations? I want to make sure I find someone who understands both the tax implications and the fiduciary responsibilities that come with managing someone else's finances.

For finding a tax professional experienced with POA situations, I'd recommend looking for either a CPA or Enrolled Agent who specifically mentions elder law or estate planning in their practice areas. You can search the IRS directory of credentialed tax professionals and filter by location and specialties. When you call to interview potential candidates, ask specifically about their experience with POA tax situations and home sales for elderly clients. A good professional should be able to explain how they handle the documentation requirements and what records they'll need from you. Also consider reaching out to any elder law attorneys in your area - they often have referral networks of tax professionals they work with regularly on these types of situations. The National Academy of Elder Law Attorneys (NAELA) has a directory that might help you find local resources. One more tip - make sure whoever you choose understands that you'll need them to communicate with you as the POA holder rather than directly with your grandmother, and that they're comfortable working with the documentation requirements that come with acting under a POA.

This is really helpful advice, especially about keeping the proceeds in her name rather than transferring directly to my account. I hadn't considered how much cleaner that would make the paper trail. Quick question about collecting improvement receipts - my mom has lived in the house for 15 years and I'm not sure she kept receipts for all the work that was done, especially from the early years. Are there other ways to document improvements if you don't have the original receipts? I know we did a major kitchen renovation and some landscaping work, but finding those old records might be challenging. Also, when you say "smaller amounts as needed" for care expenses, do you have a rough guideline for what might raise red flags? I want to make sure I'm being appropriately conservative in how I handle this.