Are you a parent considering gifting money to a child to help him/her purchase a home? The rules for using down payment gifts differ depending on which lender you use and whether your loan is guaranteed by Fannie Mae, Freddie Mac, or FHA. Here is a very, very brief and non-comprehensive summary.

If you’re the one making the down payment gift, you won’t have to pay federal income tax, nor will the recipient, as long as you give $13,000 or less in 2011 or 2012. You can give up to $13,000 per person without tax implication to any number of people in one year.

In addition, you and your spouse can each give separate gifts to your child. The IRS calls this gift splitting. For instance, if you’re planning to give to your two children, you and your spouse can each give each child up to $13,000 for a total of $52,000 ($13,000 x 4).

If you want to give more, you still may not owe taxes, but you have to inform the IRS of your gift using Form 709. Check with your tax adviser to see if the amount above $13,000 counts against a lifetime exclusion that we all get to use to pass along assets via gifts and estates.

You can’t deduct the value of gifts you make (other than gifts that are deductible charitable contributions) or any federal gift resulting from making those gifts.

I give this information to you to stimulate your need to find out more if you are going to be making a gift to a child. Get more information for yourself from IRS Publication 950. Consult your tax advisor, financial advisor and/or accountant for specific guidance in your situation.

Jeff
Good homes, good living!

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Jeff Spoelstra is a California residential real estate agent and REALTOR with years of experience making buying or selling property as easy and painless as possible. It’s my mission to provide the information you want and the help you need to get the home you’ll love.