I'm considering buying a house for 200k. When buying place ($200k), I will be paying 120k as down-payment, and financing the rest. I am thinking of my mother pay an additional 80k (to buy the place for cash).

Should I do this or not? I will still be a little liquid, but no where near as much. She will still be liquid as well. I am not married / not kids.

What are the pros/cons of this? If she adds 80k, will that count as a gift, and will I have to pay taxes on that? How do I avoid double-paying taxes on that? Makes no sense that it would be taxed again.

If double-taxation can't be avoided, what's the maximum she can give to avoid it? Also, I'm considering signing a personal loan with my mother to pay her back with 0% interest to avoid the taxation issue. Is this an option?

I don't want her name on title because she never bought a home and if she wants to buy a place, I don't want her loans to be at higher interest later on. She's fine not being on the title.

Also, I know there's a 13k yearly limit on gifting. Does that mean that if she gifts more than 13k that she will be tax-liable for it?


  • Added Country Tag, so that the reply is more relevant. Please change it if the country is not US and add appropriate country
    – Dheer
    Jun 5, 2011 at 16:16
  • 2
    If you are getting a loan from a family member, you have to be 100% sure you can pay it back, or that she can afford the loss if you don't. What will happen if you lose your job? Or are disabled in an accident? Are you OK with her being out $80K in those cases? Is she? Jun 6, 2011 at 19:43

1 Answer 1


Is it a gift or a loan?

Either way, ask the same lawyer who will do the closing to record a mortgage on the property, your mother holds it. You are required to pay her market interest, 4% or so should pass IRS scrutiny.

If it's truly a loan, decide on the payoff time and calculate the payments, she'll have a bit of interest income which will be taxable to her, and you might have a write-off if you itemize, which is unlikely.

If it's a gift, since you mentioned gift concerns, she can forgive the interest, and principal each year to total $13K, or file the popular Form 709 to declare the whole gift against her $1M unified lifetime gift exclusion (which negates the whole mortgage/lien thing)

  • 1
    Actually, intra-family loan interest rates can be well below market rates in the US. I think I'm charging about 0.5%, and could have gone lower. There is a minimum rate -- you can charge less but you'll be taxed as if that minimum rate was coming in -- but it's surprisingly low.
    – keshlam
    Jun 30, 2015 at 0:20

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