Providing financial assistance to your adult children is the simplest way to help them buy a home, but how much can you give, and what are the tax consequences of doing so? To help combat the misconceptions of helping with a down payment, we round up the top four myths of gift-giving to set your mind at ease.
Reality: Unless you've given more that $5.49 million in financial gifts during your lifetime, you won't have to pay tax on a gift. The federal government allows every individual to gift $14,000 per year without needing to file a gift tax return. So, if you and your spouse each give $14,000 to both your son and daughter-in-law, you can collectively provide $56,000 without incurring tax.
Reality: No relationship is required to provide a financial gift. You can gift every person you know $14,000 per year without incurring a gift tax. For some loan programs, however, a financial gift must come from a family member in order to be used towards down payment.
Reality: You’ll be happy to learn there is no tax for the gift recipient.
Reality: If your gift is less than $14,000, the gift doesn’t need to be reported to the IRS. From a home financing standpoint, we will need to source the gift funds according to the underwriting guidelines of the loan program you choose. Please consult your Apex representative for details.
So, there you have it! Not only is navigating around the gift tax fairly straightforward, but the gift recipient incurs no tax penalty. Looking for more information about helping a loved one buy a home? Visit our Parental Mortgage Assistance Portal to find even more resources.
*Disclaimer: This blog is for informational purposes only: please consult with a qualified tax advisor for specific advice pertaining to your financial situation, and please reference IRS Publication 559 for more information.
Topics: Buying a Home, help children buy home, giving down payment gift, tax of down payment gift?, Myths of financial gift giving