To gift a house to someone, you deal with any mortgage on the property, prepare and sign a deed transferring ownership, have it notarized and recorded at the county recorder’s office, and file IRS Form 709 to report the gift. That is the mechanical part. The harder part is what happens next: the recipient inherits your original cost basis for capital gains purposes, the transfer can disqualify you from Medicaid for years, and property taxes and insurance don’t carry over. Work through each of these before you sign anything.
Handle the Mortgage First
If the house has a loan on it, start there. Most mortgages contain a due-on-sale clause that lets the lender demand full repayment whenever title changes hands, even when no money changes hands.1Legal Information Institute (LII) / Cornell Law School. Due-on-Sale Clause Trigger it without preparation and you could be forced to repay the loan immediately or face foreclosure.
Federal law protects several common family transfers from this. Under the Garn-St. Germain Act, a lender cannot enforce a due-on-sale clause when your spouse or children become an owner, when you transfer the home into a living trust where you remain a beneficiary, or when the transfer results from a divorce decree. The protection applies to residential properties with fewer than five units.2Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions
If the recipient falls outside those categories, such as a sibling, niece, or friend, you have three options: pay off the mortgage before transferring the deed, have the recipient refinance the loan in their own name, or contact the lender and negotiate a written waiver.
Order a Title Search and Appraisal
A title search turns up liens, unpaid property taxes, and court judgments attached to the property. These don’t go away when you give the house away. They follow the property and become the recipient’s problem. A residential title search generally runs $75 to $250, more for complicated histories. Clear anything you find before recording the deed.
You also need a formal appraisal from a licensed appraiser establishing the home’s fair market value on the date of the gift. That number drives the IRS reporting. Online estimates and county tax assessments won’t satisfy the IRS, which expects an appraisal that follows recognized professional standards.
Choose and Prepare the Deed
The deed is what legally transfers ownership. Two types come up in family gifts:
- A quitclaim deed transfers whatever ownership interest you have without promising the title is clean. If a defect surfaces later, the recipient has no legal recourse against you. This is the common choice for gifts within a family.
- A warranty deed includes a legal guarantee that the title is free of defects. If a problem turns up, the recipient can hold you responsible. More protection for them, more exposure for you.
Either way, the deed has to contain specific information to be valid: the full legal names of the grantor (you) and the grantee (the recipient), a legal description of the property that matches previous deeds or tax records, and language clearly conveying your intent to transfer ownership.3Legal Information Institute. Deed Include the street address and tax parcel identification number so the assessor updates the right account.
Blank deed forms are available from the county recorder’s office or through legal document services. For a house worth six figures or more, paying a real estate attorney to review the deed before you sign is a small cost against the risk of a rejected filing or a defective transfer.
Sign, Notarize, and Record the Deed
You sign the deed in front of a notary public, who verifies your identity and witnesses the signature. Without the notary seal, the county recorder will reject the document.
Then take the signed, notarized deed to the county recorder’s office. The recorder checks basic compliance, collects a recording fee, and enters the deed into the public land records. Recording fees vary widely: some counties charge under $50, others several hundred, particularly where per-page surcharges apply. Some jurisdictions also impose a real estate transfer tax, though many exempt gifts between family members.
Once recorded, the deed is part of the permanent public record. The recipient gets the original recorded deed as proof of ownership, and recording puts the world on notice that the property has a new owner.
File a Federal Gift Tax Return
Because a house is worth well over the $19,000 annual gift tax exclusion for 2026, you as the donor have to file IRS Form 709 to report the transfer.4Internal Revenue Service. Frequently Asked Questions on Gift Taxes The form tracks how much of the gift exceeds the annual exclusion and applies the excess against your lifetime exemption. For 2026 that lifetime exemption is $15 million per individual, so almost no donor actually owes gift tax. Skipping the form still creates penalties and complications later, especially when your estate is settled.5Internal Revenue Service. What’s New – Estate and Gift Tax
Form 709 is due April 15 of the year after the gift. An extension on your individual income tax return automatically covers the gift tax return, and you can also request a standalone six-month extension using Form 8892. Neither extension gives you more time to pay any gift tax owed.6Internal Revenue Service. Instructions for Form 709 (2025)
Gift Splitting If You Are Married
Married donors can elect to split the gift, treating it as though each spouse gave half. That doubles the annual exclusion to $38,000 per recipient and divides the taxable portion between the two lifetime exemptions. Both spouses have to file their own Form 709 for the year, even if only one owned the property, and both have to consent to split every gift to third parties that year. You can’t pick and choose which gifts to split.6Internal Revenue Service. Instructions for Form 709 (2025)
The Capital Gains Trap for the Recipient
This is where gifting a house gets expensive in ways people rarely anticipate. When someone receives property as a gift, their tax basis is the donor’s original purchase price, not the current market value.7Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Tax professionals call this carryover basis. If a parent bought a house in 1990 for $80,000 and gifts it today when it’s worth $450,000, the child’s basis is $80,000. Sell it for $450,000 and $370,000 is taxable capital gain.
Inheriting the same house works very differently. Property received at death gets a stepped-up basis equal to fair market value on the date of death.8Internal Revenue Service. Publication 551 (12/2025), Basis of Assets If the parent had kept the house until they died, the child’s basis would be the full $450,000, and a sale at that price produces no taxable gain. The tax difference easily runs into the tens of thousands. When the donor is elderly and the recipient plans to sell, keeping the house in the donor’s name until death is often far cheaper than gifting it now.
The Section 121 Exclusion for a Recipient Who Moves In
If the recipient plans to live in the home instead of selling it, the picture gets better with time. Federal law lets you exclude up to $250,000 of capital gain on the sale of a principal residence, or $500,000 for married couples filing jointly, as long as you owned and used the home as your main residence for at least two of the five years before the sale.9Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence For a gift recipient, the ownership clock starts when they get the deed. The donor’s years of ownership don’t count. A child who receives a gifted home has to live in it at least two years to claim the exclusion.
Watch the Medicaid Look-Back Period
Gifting a house can wreck a donor’s Medicaid eligibility. Federal law imposes a 60-month look-back: when you apply for long-term care Medicaid, the state reviews every asset transfer you made during the previous five years.10Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets A home transferred for nothing, or for less than fair market value, triggers a penalty period during which Medicaid won’t pay for nursing facility care.
The penalty length equals the uncompensated value of the transfer divided by the average monthly cost of private nursing home care in your state. With private nursing home care averaging over $8,000 a month in most states, gifting a $300,000 house can produce roughly three years of Medicaid ineligibility. The donor has to cover care out of pocket during that time. For older donors, the Medicaid implications alone can justify holding on to the property, and it’s worth talking to an elder law attorney before signing the deed.
Insurance and Property Tax Change Too
The donor’s homeowner’s insurance policy does not transfer with the house. Insurance covers the named policyholder, not the property. The recipient needs their own homeowner’s insurance in place before or immediately after the deed is recorded, or a gap in coverage leaves the house exposed. If the mortgage stays in place under a Garn-St. Germain exemption, the lender will require proof of insurance from the new owner.
Title insurance works the same way. The policy the donor bought at purchase protects only the donor. Once ownership changes, that coverage ends, and the new owner needs a separate policy to be protected against title defects that predate the transfer.
Property taxes catch people off guard as well. Many jurisdictions reassess taxable value when ownership changes, which can drive the annual tax bill up sharply, sometimes by thousands of dollars, particularly when the donor owned the home for decades while the assessed value lagged behind market prices. Call the local tax assessor before you transfer the deed to find out whether a reassessment will be triggered and whether any family-transfer exemption applies in your area.