Parents can gift as much as they like toward a child’s down payment. In 2026, each parent can give each child $19,000 without filing a gift tax return, or $38,000 together as a married couple. Larger gifts simply require a gift tax return, and with a $15 million lifetime exemption per person, actual gift tax is rare. The part that trips families up is not the tax. It is the paperwork the mortgage lender needs, starting with the gift letter.
This guide covers both: the tax limits, and exactly what lenders ask for.
The 2026 gift tax limits
| Limit | 2026 amount | What it means |
|---|---|---|
| Annual exclusion | $19,000 per recipient | No gift tax return needed for gifts up to this amount |
| Married couple, splitting gifts | $38,000 per recipient | Requires a gift tax return to elect gift splitting |
| Lifetime exemption | $15,000,000 per person | Larger gifts use part of this; tax is owed only beyond it |
The lifetime exemption rose to $15 million for 2026 under the 2025 federal tax law, and it will be adjusted for inflation starting in 2027. Source: IRS Revenue Procedure 2025-32.
Example. Married parents give their daughter $150,000 for a down payment in 2026. They file gift tax returns electing to split the gift. $38,000 is covered by the annual exclusion, and the remaining $112,000 reduces their combined $30 million lifetime exemption. No tax is due.
A few filing points worth knowing:
- Gifts to one person over $19,000 in a year require Form 709, due April 15 of the following year.
- Splitting a gift between spouses always requires a return, even when the amounts are modest.
- Many couples own accounts jointly. If a gift comes from jointly owned property, each spouse may need to file.
What lenders need
The gift letter
Fannie Mae’s rules, which most conventional lenders follow, require a gift letter signed by the donor that includes:
- The dollar amount of the gift
- A statement that no repayment is expected
- The donor’s name, address, telephone number, and relationship to the borrower
FHA loans require the letter to be signed and dated by both the donor and the borrower.
Proof the money moved
The lender will also document the transfer itself, with one of these:
- The donor’s check or withdrawal slip, plus the borrower’s deposit slip
- A record of the electronic transfer
- A check from the donor made out to the settlement company
- A settlement statement showing the donor’s funds were received
Tip: move the money early and in one clean transfer, or send it directly to the settlement company. Several small transfers create extra paperwork.
Who can give
For conventional loans, relatives qualify, including parents, grandparents, and siblings, as can a domestic partner, a fiancé, or a fiancée. FHA loans also accept a close friend with a documented interest in the borrower. The seller, the builder, and the real estate agents cannot give.
How much of the down payment can be a gift
For a one-unit primary residence, Fannie Mae allows the entire down payment and closing costs to come from a gift. For a second home, or a two- to four-unit home, the buyer must put in 5 percent of their own funds when the loan is above 80 percent loan-to-value. Gifts are not allowed for investment properties.
Gift or loan?
A gift letter says no repayment is expected, and it must be true. If the family wants the money back, structure it as a documented family loan at the IRS rate instead, and tell the lender. Calling a loan a gift on a mortgage application is a serious problem.
The Pennsylvania angle
Pennsylvania has no gift tax. The one exception to watch: gifts made within a year of the giver’s death can be pulled back into the estate for Pennsylvania inheritance tax, to the extent they exceed $3,000 per recipient in that year. For most families, that is a reason to give earlier rather than later.
Where Karen fits
Karen Langsfeld is a REALTOR® and Pricing Strategy Advisor (P.S.A.) with Berkshire Hathaway HomeServices Fox & Roach. She tells families when the lender will ask for the gift letter and transfer records, and times the offer and settlement so the gift is documented before underwriting needs it. For more options, see the guides to selling your home to your child with a gift of equity and helping your children buy a home when mortgage rates are high, or learn more about helping your family buy or sell a home.
Contact Karen at (215) 495-2914 or through the contact page.
This guide is general information, not legal, tax, or lending advice. Confirm your plan with your accountant and lender. Sources: IRS Revenue Procedure 2025-32; IRS Form 709 instructions; Fannie Mae Selling Guide B3-4.3-04; HUD Handbook 4000.1; Pennsylvania Tax Reform Code section 2107.