As homeownership gets harder, more buyers are getting down payment help. What parents should know
As home prices rise, parents want to give money to their kids. Here's how to save on taxes when doing it, financial experts say.
TL;DR
- Home prices and mortgage rates are making homeownership more difficult, leading more parents to financially assist their children with down payments.
- In 2026, the annual gift tax exclusion allows individuals to gift up to $19,000 per recipient without reporting it to the IRS.
- Spouses can combine their exclusions to gift $38,000 per recipient by filing a gift tax return.
- Gifting strategies can involve giving close to year-end and again at the beginning of the next year to effectively double the exclusion amount.
- The lifetime federal estate and gift tax exemption for 2026 is $15 million per person ($30 million for married couples), meaning most people won't owe federal estate taxes.
- Gifts below annual exclusions do not count against lifetime exemptions, nor do direct payments for qualified education or medical expenses.
- When gifting appreciated assets, consider the tax implications: gifting during life results in a 'carryover basis' for the recipient, while inheritance provides a 'step-up in basis' which can reduce capital gains taxes upon sale.
- For 2026, long-term capital gains are taxed at 0% for single filers earning up to $49,450 and for married couples filing jointly earning up to $98,900.