FAMILY MEMBERS CAN GIFT YOU MONEY TOWARDS YOUR DOWN PAYMENT!
It’s no secret that with interest rates at 20-year highs and the median home prices in some areas of the country above $900,000 it’s as difficult as ever to buy a home right now.
A recent survey conducted by Redfin found that out of 500 home buyers under the age of 30 that 38% of them were the recipients of a gift from a family member to purchase their home.
A gift from a family member can be used for a portion of all your down-payment or closing costs involved in the purchase of a home.
The gift can be in the form of any number of sources from a family member: checking, savings, stocks, bond retirement funds, or existing home equity using our ultra-fast CCM Equity Express loan product.
Gift as Down Payment FAQs
If a family member provides a gift, do they have to go on the mortgage or the title to the home?
The correct answer here is NO! Getting a gift for a down payment does not require that person to be financially responsible for the loan or on the loan at all. That person providing the gift is not required to go onto the title or Deed of the home. If the person providing the gift would like to go on the loan, they are always able to be added to a loan as a co-signer if they meet the lenders credit requirements. A person providing the gift can also be added to the title or Deed of a home loan without being on the loan if that is something that any of the parties would prefer.
What are the Federal Income Tax Requirements for giving a Gift?
The most important thing to remember here is this information is not intended to be taken as income tax advice, and all Federal Income Tax questions should be confirmed by a licensed CPA or licensed tax attorney.
Annual Exemption: In addition to the lifetime exemption, there is also an annual gift tax exemption. That annual exemption goes from $16,000 to $17,000, in 2023 for each person you make a gift to in 2023
The amounts exempt from federal estate and gift taxes are adjusted for inflation each year. The IRS has come out with the exemption amounts for 2023.
Gift and Estate Tax Exemption: The amount you can give during your lifetime, or at your death, and be exempt from federal estate and gift taxes has risen from $12,060,000 to $12,920,000. This means that a married couple could give more than $25 million in assets tax free.
Again, this information is not intended to be taken as income tax advice, and all Federal Income Tax questions should be confirmed by a licensed CPA or licensed tax attorney.
What will the family member providing the Gift have to document?
Mortgage lenders are required to document the source of funds used to purchase a home. The person providing the gift will need to be prepared to sign a standardized “gift letter” as well as provide bank statements from the donor. If money has been transferred to different accounts additional documentation will be required. It is highly recommended to not move any money around in a purchase transactions without coordination with your loan officer.
Annual Exemption: In addition to the lifetime exemption, there is also an annual gift tax exemption. That annual exemption goes from $16,000 to $17,000, in 2023 for each person you make a gift to in 2023
The amounts exempt from federal estate and gift taxes are adjusted for inflation each year. The IRS has come out with the exemption amounts for 2023.
Gift and Estate Tax Exemption: The amount you can give during your lifetime, or at your death, and be exempt from federal estate and gift taxes has risen from $12,060,000 to $12,920,000. This means that a married couple could give more than $25 million in assets tax free.
Again, this information is not intended to be taken as income tax advice, and all Federal Income Tax questions should be confirmed by a licensed CPA or licensed tax attorney.
