MW My sister, mother and I are giving my son $20,000 toward a down payment. Do we report it to the IRS?
By Quentin Fottrell
'I'm confident that I will never exceed the lifetime gift-tax exemption'
"The $20,000 actually represents gifts from three different people." (Photo subjects are models.)
Dear Moneyist,
My son is buying his first home, and his grandmother, aunt and I are giving him $20,000 for the down payment. The loan officer has advised his grandmother and aunt to give me their portions, which I will deposit into my account. The funds will then be sent directly from my account to the closing attorney.
Since this amount exceeds the $19,000 annual gift-tax exclusion, will I need to report it to the Internal Revenue Service? The $20,000 actually represents gifts from three different people, so is it possible that I won't have to report it? I'm confident that I will never exceed the lifetime gift-tax exemption.
The Mother
Related: We asked our wedding guests to give money to St. Jude's Children's Hospital. Can we write off their donations?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
You will not have to file an IRS Form 709 even though the total value of your monetary gift to your son exceeds the $19,000 limit.
Dear Mother,
I love it when three generations of a family make a plan to come together.
This is a big milestone in your son's life, and knowing that his grandmother, aunt and mother are all cheering him on with the greenbacks, as well as good wishes, must mean the world to him. It gives you an even bigger vested interest in his happiness and financial security. Brava to the generous women of your family.
As to your question about gift tax: You will not have to file an IRS Form 709 even though the total value of your monetary gift to your son exceeds the $19,000 limit, because the three of you are each contributing part of that amount. As long as you have the paper trail in the event you are audited, you will be fine.
The IRS allows people to give individuals up to $19,000 annually ($38,000 for married couples) without being required to report the gift to the IRS. This annual exclusion applies to cash, stocks and even property. The total lifetime tax-free gift allowance is now $15 million, an increase from the previous $13.99 million.
Lenders and co-op boards want to see that a buyer has a solid financial foundation.
None of you, I presume, are personally giving more than $19,000. The IRS does not care much whether you send the money to your son via Zelle, Venmo, wire transfer between your banks or carrier pigeon, as long as you account for it accurately and honestly. Your son is fortunate to have such kind family members.
Rules vary by mortgage and financial institution, but the money would likely be better off in your son's bank account than in yours. This will boost his chances when the lender assesses his loan application. It will also be useful if he is buying in a co-op whose board has the final say on whether he's admitted.
Lenders and co-op boards want to see that a buyer has a solid financial foundation, and some won't consider all the money if they believe it is a loan. Borrowers sometimes disguise loans as gifts in order to artificially inflate their bank balance, so the three of you may have to sign a letter testifying to the fact that this is a gift and not a loan.
Conventional loans vs. FHA loans
"With conventional loans, lenders usually allow gift money for some or all of your down payment, closing costs and financial reserves you'll use to pay the mortgage," Experian says. "However, the acceptable sources are limited to family members and romantic partners, and gift funds can't be used on investment properties."
Federal Housing Administration loans - government-backed loans to help first-time or low-income families purchase a primary residence with a down payment as low as 3.5% - also accept these kinds of cash gifts for down payments, closing costs or cash reserves, as long as the money is a true gift and carries no expectation of repayment.
For FHA loans, it notes, gift money can come from a greater variety of sources than for conventional home loans. In addition to family members, those include close friends, employers or labor unions, charitable organizations and public entities with programs for first-time or low- to moderate-income buyers.
There are other ways to transfer wealth without triggering the gift tax.
For what it's worth, there are other ways to transfer wealth without triggering the gift tax. One option is to make direct payments to medical providers or educational institutions on someone else's behalf for qualified expenses. These payments are not considered taxable gifts and do not count toward your annual $19,000 gift tax exclusion.
Gifts to a spouse, assuming they are a U.S. citizen, are generally not subject to gift tax either. Ditto for contributions to a 529 tax-advantaged education savings account. You can actually front-load up to five years' worth of annual exclusion gifts for a child or grandchild for gift-tax purposes.
In addition, gifts made to qualified charitable organizations are also exempt from gift tax, as long as certain rules have been followed. Depending on your tax bracket, they may also give you some income-tax benefits. Finally, contributions to qualifying political organizations are also largely exempt from gift tax.
The bottle of champagne to celebrate your son's new home will also be tax exempt.
Related: 'My husband is leery of my plan': We are both 60 and have $5 million. Is now a good time to dip into our savings?
The Moneyist regrets he cannot respond to letters individually. Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
More columns from Quentin Fottrell:
'I'm already feeling anxious': My ex-husband offered to give me a $30,000 lump sum for child support. Is there a catch?
My husband took out a $100,000 Parent PLUS loan for his daughter. She dropped out, citing mental-health issues. Should we refinance?
I'm selling my $1 million Maui home. Will my agent charge me less than a 6% commission?
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-Quentin Fottrell
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June 02, 2026 06:15 ET (10:15 GMT)
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