Qualified personal residence trust taxation focuses on how gift, estate, and income tax rules apply when a home is transferred into and eventually out of a QPRT. At creation, the grantor makes a taxable gift of the remainder interest in the residence, valued using IRS Section 7520 rates and actuarial tables that reflect the retained term. That gift may use part of the grantor's lifetime exemption or, in some cases, fit partly within annual exclusions if structured with additional planning. If the grantor survives the term, the property is generally removed from the grantor's estate, though the beneficiaries receive a carryover basis rather than a step-up at death. If the grantor dies during the term, some or all of the property is pulled back into the estate, reducing the transfer tax benefit. Income tax considerations include property tax deductions, potential rent payments if the grantor stays after the term, and coordination with state rules.

In advanced planning, tax attorneys and CPAs model qualified personal residence trust taxation before a client commits to the strategy. They calculate the initial remainder value, project estate tax savings, and examine the tradeoff between transfer tax benefits and loss of step-up in basis. Advisors help clients understand that surviving the QPRT term is key to realizing anticipated tax benefits and that rent payments after the term can be used as an additional estate-freezing tool. When reviewing existing QPRTs, professionals evaluate whether actual appreciation and changing tax laws still make the arrangement attractive. Clear explanation of QPRT taxation helps clients appreciate why this tool is powerful but complex and why ongoing coordination with tax advisers is crucial.