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I have received a state tax credit for a historic rehabilitation project, which for a fixed fee the state of Arkansas allows me to partially sell/transfer. Whoever has the credit has up to five years to apply it to their state income taxes.

I'm interested in giving part of this credit to tax-paying members of my family (not part of my household) as a gift, but not so much if they'd have to pay a significant tax on it.

I've heard it said that if I sell the credit, I would be on the hook for that income. But if I sell it for a token amount, or gift it, what are the tax implications then?

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I'd be looking to transfer 10k out of a 25k credit, but I'd prefer an answer that would elucidate what would happen if those numbers were in different ranges.

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  • How large is the tax credit? And you can partially sell/transfer it: how much would you transfer? Jan 30 '20 at 11:10
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    Gifts, in the strict sense, are not taxable for the recipients - only for the givers, and only under certain conditions. But I've never heard of a transferable tax credit like you're describing, it strikes me as a narrow and unusual case. It might make sense to ask your state's revenue office or a tax professional who works in your state if you don't get an answer here from someone familiar with that specific credit and how it works.
    – dwizum
    Jan 30 '20 at 16:01

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