My father has offered to pay up to $70k towards a down payment on a condo for my wife and me. I understand that gifts of over $13k get taxed pretty heavily. Is there a way to avoid this when it comes to him helping with the bulk of the down payment? If he co-signs, does that solve the tax issue?

  • I added the location tag for you, correct it if its wrong
    – littleadv
    Apr 9, 2012 at 21:17

3 Answers 3


As littleadv points out, $13K can be given to each person per year without having to pay gift tax (or even file a gift tax return). So perhaps as much as $52K might be shielded from gift tax this year if you are buying the condo jointly with your spouse or significant other (SOSO) and your father and his SOSO each gift $13K to you and your SOSO. As for the rest, your father is entitled to a lifetime combined gift and estate tax exclusion in addition to the annual exclusion of $13K per person per year. The amount of the exclusion has been varying lately as Congress keeps changing the rules. I believe the exclusion is $5 million right now and is scheduled to go down to $1 million in the unlikely event that Congress does nothing about it (reducing or eliminating estate taxes entirely is a high-priority item for one of the political parties). The remainder of the $70K gift can be counted against this combined exclusion so that no tax will need to be paid right now. Your father will need to file Form 709 with the IRS (it is filed separately from Form 1040 but with the same due date) which will say $X has been given to you ($Y to your SOSO?) of which $13K per person counts towards the annual exclusion and the balance towards the lifetime combined exclusion. The gift tax due is thus zero. When your father passes away, his estate will be exempt from estate tax up to whatever remains by then of his lifetime exclusion (if he makes similar gifts to your siblings, say). Most estates in the US do not pay any estate tax whatsoever because the estates are smaller than the exemption. If your father is wealthy enough that reduction of his lifetime exclusion is a serious concern to him, then he will likely have enough lawyers to advise him of alternate strategies anyway.

  • 5
    +1: loved the part "If your father is wealthy enough ... he will likely have enough lawyers to advise him"
    – Dheer
    Apr 10, 2012 at 9:19
  • Can money be "gifted"/transferred between spouses without limit or taxation or is that also subject to the $13k rule?
    – Steven
    Apr 10, 2012 at 14:20
  • 1
    Money and property can be gifted/transferred between spouses without limit (it is called the unlimited marital exemption) and without incurring federal taxation. There may be separate state rules on gift taxes, or there may be a difference between community property states and non-community property states. There may be differences between what some states regard as spouses and what the Federal government recognizes as spouses. Apr 10, 2012 at 15:50
  • 2
    Any idea how it would work if the son is a U.S. taxpayer but the father lives in Canada?
    – Chelonian
    Apr 10, 2012 at 18:44
  • @Chelonian I think that would be best as a new question on the site as it would involve two different countries laws about gifting and taxes.
    – Alex B
    Apr 10, 2012 at 19:37

It's common for the 'parent' to sign a gift note to the bank, and after the closing, the homeowner signs a note addressing the money as loan. As noted, a couple can gift a couple $52K total, so we are really talking about $18k. This $18K can be forgiven in the new year as part of the new year gift limit.

Aside from the fib told to the bank, loans like this are common and legitimate. If I lend my child $130K, I have to declare the interest as income each year, and if I die before forgiving it all, it's treated as part of the estate for estate tax purposes.

If you want to be 100% legit with the bank, show the loan, and $18K will have a tiny monthly payment, under $100. If your cash flow is so tight, $100 will make a difference, you have bigger issues.

  • 2
    Not only must interest be declared as income by the lender, but (for loans between closely-related parties) it must be charged at what the IRS says is a reasonable rate of interest; else the difference is a gift to the borrower and a gift tax return is likely required. On the other hand, it is possible to structure the loan as requiring annual or semi-annual periodic payments instead of monthly payments, and so the entire repayment could be forgiven in future years (though the lender will still need to declare the interest as income). (continued) Apr 10, 2012 at 14:39
  • (continuation) If this forgiveness route is chosen, it is useful to create a paper trail (father gives son a check as a gift for each year a few days before the payment is due; son writes a check payable to the father for the payment due). Apr 10, 2012 at 14:42
  • @DilipSarwate - right, right, and right. Excellent comments. For the OP, the interest on the remaining $18K is minimal, but either way, your points apply. In these cases, paper trail, and accuracy is everything. Apr 10, 2012 at 15:11
  • Although I awarded the answer to @DilipSarwate, I think the combination of his/her answer and this one really flesh out the picture fully. Thanks!
    – maxedison
    May 25, 2012 at 16:48
  • Dilip is a male Hindu name meaning "A king of surya vamsha." His answers are excellent, and I take no offense to coming in a close second. Glad to help. May 25, 2012 at 18:54

Not really, if he cosigns the bank will also require his name to be on the title, and you'll just be deferring the gift tax to when he's removing himself from the title.

You can formalize it as a loan, but then the bank might have objections.

But, gifts are per person, so your father can give you 13K and your wife 13K (assuming you'll be owning the condo jointly). Someone else (your mother? Father's wife? Brother?) can do the same. etc etc. $13K limit is per triple < year, donor, donee > (i.e.: for each year from each donor to each donee). Note that there are some gift-splitting rules, that should be taken into the account, and sometimes even if no tax owed, gift tax forms must be filed. Consult a professional.

Related IRS pub. I'm assuming you're in US, if elsewhere, the rules will differ.

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