Gift Taxes on Down Payments When Buying a Home... what most people don't know

Sep 6

With rising property values, more and more homebuyers are getting gifts from their parents for the downpayment. The topic of gift taxes usually ensues because parents think if they gift over a certain amount ($18K for 2024) then they’ll have to pay taxes on the gift.

But here’s the critical piece... no one has to pay tax on a gift until the lifetime gift amount reaches $12.92 million!

So what’s the $18K number about?

If someone gifts more than $18K in a given year, the giftor simply needs to file 1 extra page with their taxes stating how much the gift amount was. This essentially gets the gift on the IRS’s radar so they can start tallying the lifetime amount.

Once someone gets to the point of gifting more than the lifetime exclusion amount of $12.92 Million, THEN the IRS would add up all those forms over the years and calculate/assess a gift tax.

The obvious point here is that most people are never going to even get close to having to pay gift taxes. Knowing this can save the whole family a lot of stress.

Given that I am a Mortgage Loan Officer, not a tax advisor, the disclaimer is to check with one. But here is an article that lays this out well:
https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates

Call me anytime to discuss this topic further, or if you simply have a mortgage question.