Learn about the documentation needed and possible taxes when using a cash gift for a down payment on a home.

Home prices are at historic highs and more younger adults are receiving financial help to become homeowners. A 2025 Redfin survey showed 20% of millennials and 15% of Gen Zers received cash gifts from family members to help with their down payments. The assistance can help buyers qualify for a more expensive home or purchase a home sooner. While gift money can help make home ownership more attainable, both the giver and recipient should understand the documentation and tax requirements.

Gift money must not require repayment

When gift money comprises some or all of a down payment, the lender will typically require a gift letter confirming the money is a gift, not a loan. The letter generally identifies the giver, describes the relationship between the giver and recipient, and the gift amount.

Who can give down payment money?

Most often, parents gift money for home down payments but other sources may be available, depending on the mortgage program. Buyers may qualify for assistance from friends, employers, charitable organizations or government agencies.

As a rule, lenders do not allow gifts from parties with a financial interest in purchase transaction, such as the home seller or real estate agent.

Eligible donors and assistance programs vary by loan type. Check with the lender before accepting funds.

Are there taxes on down payment gifts?

Recipients generally don’t owe federal income tax on gifts. Givers might.

For 2026, the federal gift tax annual exclusion is $19,000 per recipient, per giver. A married couple could give a total of $38,000 to one recipient if each spouse gives $19,000. Gifts over the annual exclusion limit may require the giver to file a federal gift tax return, but that doesn’t necessarily mean gift tax is owed.

Donors should consult a qualified tax professional about their individual circumstances.

How are gift funds transferred?

Gift funds may be transferred one of two ways: directly to the closing agent or to the recipient’s bank account before being transferred for the home purchase. If the funds pass through the recipient’s bank account, the lender may require documentation tracing the money from the giver to the recipient. Ask your lender which transfer method and records are required.

Get answers to your mortgage questions

Whether you’re using a gift for your down payment or a exploring a 0% down home loan, our mortgage loan officers can help you understand your options. Connect with one of our mortgage loan officers online or call 800.991.2221.

 

All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications and collateral conditions.