Yes, you can give your son money to buy a house, and in almost every case neither of you will owe federal tax on the transfer. For 2026, you can give up to $19,000 per year without any filing requirement, and larger gifts simply chip away at a $15 million lifetime exemption rather than producing a tax bill. The bigger practical hurdle is usually the mortgage lender, which will require specific documentation showing the money is a true gift and not a hidden loan.
How Much You Can Give Without Filing Anything
The federal gift tax annual exclusion for 2026 is $19,000 per donor, per recipient.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Give your son $19,000 or less during the calendar year and you file nothing.
The per-donor structure creates real room for a couple. If both you and your spouse have funds, each of you can independently give $19,000 to your son, for a combined $38,000 with no reporting. If your son is married, each of you can also give $19,000 to his spouse, taking the annual total to $76,000 that stays entirely off any tax return.
When only one spouse controls the money, you can still use both exclusions through gift splitting, which lets a gift made by one spouse be treated as though each spouse made half.2Office of the Law Revision Counsel. 26 U.S. Code 2513 – Gift by Husband or Wife to Third Party Both spouses have to consent on IRS Form 709, which means gift splitting requires a filing even when the combined amount stays within the exclusion.
What Happens if You Give More Than the Exclusion
Going above $19,000 to a single recipient means filing Form 709, but filing is not the same as paying. The excess reduces your lifetime gift and estate tax exemption, which for 2026 sits at $15 million per person following the One, Big, Beautiful Bill signed on July 4, 2025.3Internal Revenue Service. Whats New — Estate and Gift Tax Actual gift tax kicks in only after your cumulative lifetime gifts above the annual exclusion exhaust that $15 million. For most parents helping a child buy a first home, no tax will ever be owed. The reporting still applies, though, whenever a single gift crosses the annual threshold.4Internal Revenue Service. Instructions for Form 709
Skipping a required Form 709 is not a good idea. The failure-to-file penalty is 5% of any unpaid tax per month, capped at 25%.5Internal Revenue Service. Failure to File Penalty With no tax owed the calculated penalty is zero, but missing the return can invite scrutiny and separate penalties for not providing required information.
Your Son Owes No Income Tax on the Money
A recipient does not report a gift as income. The IRS treats gifts as nontaxable to the person receiving them, and the reporting responsibility sits entirely with the donor.6Internal Revenue Service. Gifts and Inheritances Your son will not put the gift on his federal income tax return no matter how large it is. He should still keep records of the transfer, because the mortgage underwriter will ask about it.
What the Mortgage Lender Will Require
Lenders accept gifted funds for a down payment on most loan programs, but they need proof the money is genuinely a gift. The main document is a gift letter. It has to include:
- The exact or maximum dollar amount
- Your full legal name, address, phone number, and relationship to the borrower
- An explicit statement that you do not expect repayment in cash, services, or any other form
Fannie Mae’s selling guide sets out these elements directly, and most lenders use a template built around them.7Fannie Mae. Personal Gifts Ask your son’s loan officer for the form early so nothing holds up closing.
Underwriting also wants to see the money’s path. Expect to provide 30 to 60 days of bank statements showing the funds sat in your account before the transfer, plus proof of the transfer itself, usually a wire confirmation or copy of the canceled check. The underwriter compares the amount on the gift letter against your withdrawal and against the deposit into your son’s account. Small mismatches, including wire fees, can prompt follow-up questions.
Season the Funds if You Can
Money that has been in your son’s account for at least 60 days is generally considered seasoned. Seasoned deposits show up as existing balances on his statements, and the lender often will not require a gift letter or source documentation for them. Transferring the money well before he applies makes the paperwork lighter.
Avoid Large Cash Deposits
Cash deposits of $10,000 or more trigger a Currency Transaction Report filed by the bank under the Bank Secrecy Act. It is routine, not an accusation, but it tends to generate extra questions from underwriting. A wire transfer or check leaves a cleaner trail for the file.
How Gift Rules Change by Loan Type
Conventional Loans
On a conventional loan for a one-unit primary residence, gift funds can cover the entire down payment with no minimum contribution required from your son, regardless of the loan-to-value ratio.7Fannie Mae. Personal Gifts On a two- to four-unit primary residence with a loan-to-value above 80%, the borrower has to put in at least 5% of his own money. Gift funds are not allowed on investment properties. Fannie Mae accepts gifts from relatives by blood, marriage, adoption, or legal guardianship, as well as from a domestic partner, fiancé or fiancée, former relative, or someone with a long-standing family-like relationship — a parent clearly qualifies.
FHA Loans
FHA requires 3.5% down, and the whole amount can come from a gift as long as the donor is eligible. Eligible donors include family members related by blood, marriage, adoption, or legal guardianship, an employer, a labor union, a charity, or a government homebuyer assistance program. FHA also insists that the donor’s funds come from an acceptable source, not a personal loan or credit card.
VA Loans
VA loans generally require no down payment, but gift funds can go toward closing costs and the VA funding fee. A gift letter is required when the money comes from someone not involved in the sale.8U.S. Department of Veterans Affairs. VA Home Loan Guaranty Buyers Guide
Giving a Home Instead of Cash
If you already own the house your son wants, you can sell it to him below market value. The difference between the appraised fair market value and the sale price is called a gift of equity, and the lender can treat it as his down payment. A home that appraises at $400,000 and sells to him for $300,000 produces a $100,000 gift of equity applied to the purchase.
The lender will require an appraisal by a licensed, independent appraiser to establish market value. The purchase contract must state both the sale price and the dollar amount of the equity gift, and your son’s lender will still want a gift letter confirming you expect no repayment.
The IRS treats a below-market sale the same way it treats any other gift. The gap between fair market value and sale price is a taxable gift, and if it exceeds $19,000 (or $38,000 if both spouses participate) you file Form 709 and apply the excess against your lifetime exemption.4Internal Revenue Service. Instructions for Form 709
Watch the Cost Basis
Property received as a gift generally carries the donor’s original cost basis to the recipient.9Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust If you bought the home for $200,000 years ago and it is worth $400,000 now, your son’s basis for future capital gains is $200,000, not the current value. When he sells, he owes capital gains tax on the difference between the sale price and that carried-over basis, minus qualifying improvements and any primary residence exclusion. Inherited property, by contrast, gets a stepped-up basis to fair market value at the owner’s death. That gap is worth weighing before making a large equity transfer during your lifetime.
Structuring the Transfer as a Loan
If you want the money back, or you want to keep your lifetime exemption intact, a formal intrafamily loan can work. The IRS will respect a family loan as real debt only if it meets specific conditions.
Interest has to be at or above the Applicable Federal Rate the IRS publishes monthly. For February 2026, the minimum rates compounded annually are approximately 3.56% short-term (up to three years), 3.86% mid-term (three to nine years), and 4.70% long-term (over nine years).10Internal Revenue Service. Revenue Ruling 2026-03 – Applicable Federal Rates Check the current ruling before finalizing terms. Charging less than the AFR causes the IRS to treat the shortfall itself as a gift.
The loan also needs to look like a real debt in every other respect:
- A written promissory note stating principal, interest rate, maturity, and repayment schedule
- Regular scheduled payments actually made into a dedicated account
- A recorded lien against the property when the loan finances real estate
- A borrower who can realistically make the payments
If payments never happen, terms go unenforced, or the family prearranged forgiveness, the IRS can reclassify the whole principal as a taxable gift. Any interest shortfall below the AFR can also be treated as an additional gift. And if your son will carry a separate mortgage alongside the family loan, the mortgage lender will count both obligations in his debt-to-income ratio. Interest you receive is taxable income to you.
A Word of Caution About Medicaid
If long-term care could be in your future, a large gift may affect Medicaid eligibility. Medicaid looks back at all asset transfers made in the 60 months before a long-term care application. A gift made inside that window can trigger a penalty period during which Medicaid will not cover nursing home costs. The penalty length equals the gift amount divided by the average monthly nursing home cost in your state — a $100,000 gift in a state where monthly care averages $5,000 produces a 20-month ineligibility period. That clock starts only after you enter a nursing home, spend down other assets to the Medicaid limit, and apply for coverage, not when you make the gift.
Some transfers are exempt, including transfers to a child under 21, a blind or permanently disabled child, or a caretaker child who lived in the home and provided care that delayed nursing home admission. Returning the full amount of a penalized gift can cure the penalty. If long-term care is a realistic concern for you or your spouse, talk to an elder law attorney before making a substantial gift.