Gift Tax Exclusion for Home Purchases

There are really two key parts to this. The first is the annual gift exclusion, which is $18,000 per recipient per year as of 2024. Most people have heard of it. What they don't realize is that there's a second, much bigger tool — the lifetime gift tax exemption. Right now that amount is $13.61 million per person. That's based on the federal estate tax threshold. If your total estate is under that number, you're not paying federal estate tax — and that same limit applies to gifts you make during your lifetime.

The first $18,000 is covered by the annual exclusion — zero paperwork, zero reporting, doesn't count for anything. The remaining $82,000 counts against the lifetime exemption. The parent files a gift tax return, IRS Form 709, to document it. But they don't owe any taxes unless they've already used up their entire $13.61 million lifetime exemption. For the vast majority of families, that's simply not going to happen. Filing the return is not the same as writing a check.

Each parent has their own annual exclusion and their own lifetime exemption. So two parents giving to one child can combine their annual exclusions — called gift splitting — to give $36,000 per year with no reporting required. And together they have $27.22 million in lifetime exemption before gift taxes become a real concern. There's also a concept called portability: whatever lifetime exemption a spouse doesn't use passes to the surviving spouse. So for married couples, coordinating large gifts — even six-figure ones — almost never triggers actual tax liability.

Three big ones. First: "I'll owe taxes on the gift." For most families, no. You may need to file a return, but that's not a tax bill — it's just the IRS keeping a running tally against your lifetime limit. Second: "My child will owe income taxes on the money." Absolutely not. Gift recipients don't pay income tax on gifts received. That one trips people up constantly. And third: "I have to give it all at once." Not at all. The annual exclusion resets every January 1st. A parent who wants to give $50,000 could spread it over three years and reduce or eliminate the paperwork entirely.

Exactly. A loan between parent and child complicates things significantly — for the mortgage file and for the estate later. If a parent is in a position to simply give the funds and document it properly, that's almost always the cleaner solution for everyone.

There are a few approaches. Some families give to other children over time using annual exclusions. Others document a large gift as what's called an intervivos gift — meaning a gift made during your lifetime — and build equalization language directly into the estate plan. So the estate planning documents reflect that child A received $100,000 during your lifetime, and the remaining children's inheritance is adjusted accordingly so everyone ends up equal in the end. It's a clean way to handle it when you want to help one child now without creating tension with the others later.

Yes — and this is important. The current $13.61 million lifetime exemption is set to drop significantly after 2025 under existing law, back to roughly $7 million per person adjusted for inflation, unless Congress acts to extend it. If you're thinking about making a large gift, now is genuinely a good time to talk to an estate attorney. The window may be closing.