Rules for Gifting Money to Family for a Down Payment in 2026
A gift can make a big difference for a family member buying a home, but there are many tax and (non-tax) considerations for the gift giver.
Key Takeaways
In 2026, you can gift up to $19,000 ($38,000 for a married couple) to each recipient without incurring gift tax liability.
If you want to go beyond the annual exclusion gift, consider gift and estate tax rules and reporting requirements.
Also think about your family’s cash flow, retirement needs and estate plan, as well as the recipient’s.
Many first-time homebuyers struggle to come up with a 15% to 20% down payment for a house, especially if they’re still paying off student loans.
As adult children look toward homeownership, some parents decide to gift money for a down payment to make this goal possible. Those who can comfortably make a down payment gift without sacrificing their own retirement may decide to help their kids become homeowners. They may view it as a way to make an impact and allow their family members to fulfill their goals while still being able to see the results.
If you determine this is right for your situation, consider the rules on gifting money to family.
A gift is a transfer of money or property without expecting anything of equal value in return, according to the IRS. This includes selling something at less than full value or making certain interest-free or reduced-interest loans.
Gifting to a Child or Family Member for a House Purchase
The IRS definition of gift is important because providing a monetary gift or a gift of property may impact reporting requirements and tracking of the lifetime gift and estate tax exemption for the donor.
Some parents may want to simply give their adult children a home rather than just helping with a down payment. But transferring a property to a family member or child is not as simple as giving them the keys. The parents' own cash flow, retirement needs and legacy goals to family members and charities must be considered.
If you want to help your family member obtain a home, there are several options. You can make an outright gift, lend your child the funds to purchase the home (an intra-family loan), leave the property as an inheritance or finance the purchase for your child or family member. However, because there are gift and estate tax rules in addition to potential reporting requirements for the gift giver, it’s wise to consult with your team of advisors, such as a tax advisor, estate planning attorney and financial advisor.
Basics of Gift and Estate Tax Rules
Before providing a monetary gift or transferring property to a family member for a home purchase, it’s essential to understand the federal tax implications.
Annual Gift Tax Exclusion
For 2026, the IRS’s annual gift tax exclusion is $19,000 per recipient. A married donor can double the annual exclusion gifts to each recipient by “splitting the gifts.” That means that you and your spouse can gift up to $38,000 to anyone, including adult children, without reducing your lifetime gift exemption ($15 million per individual in 2026) or paying gift tax at the 40% rate.
For example, if your child purchases a home with a spouse, you and your spouse could each gift up to $19,000 to each of the buyers for a total of $76,000.
If your gift exceeds this amount, you may want to consult a tax advisor, estate planning attorney and financial advisor on ways to structure this gift in a tax-efficient and thoughtful manner that potentially benefits you and the recipient.
Historically, the IRS has raised the annual gift exclusion in $1,000 increments to account for inflation. In 2026, the amount remains at $19,000, with no increase from 2025. The OBBBA set the lifetime gift and estate tax exemption in 2026 to $15 million per individual, with any excess gifts made during their lifetime or bequests upon passing being subject to tax at 40% rate. Note these amounts are adjusted for inflation beyond 2026.
However, the exclusion for gifts to a spouse who is not a U.S. citizen has increased to $194,000 for 2026, up $4,000 from 2025.
Lifetime Gift and Estate Tax Exemptions
The current U.S. transfer tax rules allow each individual to make lifetime gifts and bequests at death up to the “basic exclusion amount” without gift or estate tax. In 2026, these amounts are set at $15 million per person and will be adjusted for inflation beyond 2026.
Gifts for Education and Medical Expenses
Certain gifts made for education and/or medical expenses that are paid directly to the providers are above the annual gift exclusion and do not reduce the donor’s lifetime gift and estate exemptions.
Reporting the Gift on a Gift Tax Return
If you make a gift that is larger than the annual exclusion, you are required to report the gift by filing IRS Form 709 at the same time as your individual income tax return. Even if you do not owe gift taxes on the gift because you have not used up your $15 million lifetime exemption, you are still required to file Form 709.
The IRS will use your 709 forms to track your total gifts throughout your lifetime. If your gifts eventually reach the lifetime exemption limit, you will then be required to pay gift taxes on additional gifts greater than the annual exclusion, or your estate will be subject to paying estate taxes on bequests left to heirs.
Ways To Give a Gift for a Home Purchase
If you decide to give a gift to help your child or family member purchase a home, you have several options.
Cash Gifts
Gifting cash is simple. You can provide the gift funds in cash to your family member or electronically send the funds to them through a bank or mobile finance app. You will need to communicate with the recipient to let them know the funds are coming, communicate your expectations for the gift (e.g., the funds will be used for a down payment on a home) and determine whether their mortgage lender requires a gift letter for documentation.
Investment Assets
If you are gifting securities from taxable accounts rather than cash, you may want to coordinate with your financial advisor to ensure the gifting is done in a tax-efficient manner that would minimize possible capital gains to the recipient.
Take stock of your cost basis in the taxable assets you are gifting to a family member. Remember, the recipient will assume your cost basis and holding period in the donated assets, which may result in future capital gains taxes upon a later sale, and it may be taxed as short- or long-term gains rates depending on your own holding period. If you have reached an age where you must take required minimum distributions (RMDs) from a retirement account but you don’t need the money for your own living expenses, you can use these taxable distributions to gift to a child or family member.
Property
Some families own a home or property that they would like to gift to a child. In that case, you can have the property transferred as a gift, but be sure to communicate your cost basis in the property to the recipient so they can maintain good recordkeeping.
The recipient will maintain your cost basis and your holding period in the property. You will need a real estate agent to value the property for gift tax reporting, a CPA to report the gift on the gift tax return and an attorney to help you complete a change of ownership form, change the title on the deed, prepare the deed and notarize and file the deed.
Providing a Gift Letter for a Mortgage
If your child plans to use your gift as a down payment on a home mortgage, the lender will likely require documentation for that gift. You or your adult child should check with the mortgage lender to determine the requirements for documenting a down payment gift. Mortgage lenders have these rules to protect themselves against fraud or default.
Gifts are generally permitted for the full amount of the down payment on a primary residence. Specifics may vary depending on whether the borrower is applying for a conventional loan, a Federal Housing Administration (FHA) loan or a Veterans Affairs (VA) loan.
There may be additional steps if funds have been in the borrower's bank account for less than 60 days. The gift giver may need to provide bank statements showing the origin of the funds. They may also require a letter stating that the money is a gift and does not need to be repaid. Gift letters should explain who the donor is, how much they’re giving and the date of the fund transfer. You may want to keep a paper trail to document this, too.
If your child or family member is purchasing an investment property with a mortgage loan, gift funds are not allowed to be used as part of the down payment. However, if your child is purchasing the property in cash (without a mortgage), they can use gift funds.
If your child is purchasing a primary home with a mortgage loan, gift funds can be used for the down payment. However, most mortgage lenders will not allow gifts from friends or non-family members to be used for a down payment. Acceptable sources of gift money for a conventional loan include anyone related to the borrower by blood, marriage, adoption or legal guardianship.
Using Conventional Loans vs. Gift Money
If you’re trying to decide between providing a family member with a gift or co-signing on a conventional loan to purchase a home, there’s no one-size-fits-all answer. There are several factors to consider.
Gift funds may free the homebuyer from repayment, but they may result in gift tax reporting and possible liability for the gift giver. A large gift to help a family member buy a home could jeopardize the giver’s retirement or other financial goals if not properly coordinated with cash flow.
Conventional mortgage loans typically offer flexibility and interest rates that are potentially tax deductible. However, it’s important for the borrower to consider the repayment obligations, eligibility requirements and other financial plans.
Co-signing on a loan will leave you responsible for the full mortgage amount if your child is unable to repay it. For that reason, giving a gift toward the price of the home could be less risky.
Intra-family loans are considered a flexible gifting technique during low-interest-rate environments. The IRS’s Applicable Federal Rate is published monthly and determines the amount of interest charged depending on the loan term.
Deciding whether to gift or lend money to your child for a home purchase is not a quick decision, but we can help guide you through the financial aspects of the decision. It’s important to prioritize your own financial health and goals first to ensure that giving gifts does not negatively impact your own finances or legacy planning goals.
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This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.