Monday Real Estate Market Myth: Gift for a Down Payment

Myth: An individual is allowed to give as much money to an individual for a down payment on a house.

False: Technically no. According to federal tax law, an person can only give up to $13,000 per person or $26,000 per couple each year.  One of the biggest hurdles in owning a home is the initial down payment up to 20% of the purchase price of the property, unless the buyer goes FHA, USDA, or VA with under 5% down payment required.

A few ways someone can give money without being considered a gift would be:

  • pay down other loans such as tuition or car payments, so the buyer has more money to save up front. Education and medical loans are not taxable as they are given directly to the institution.
  • lend money to the borrower and have them pay interest until it is forgiven
It is best to consult a certified public accountant and make sure the gift-recipient has the means to make future payments or there is some collateral for debt collection.  A good policy to remember is to only lend what you can afford to lose-worst case scenario.

If you need a local real estate agent in the Hollister, San Juan, Aromas, Gilroy, Salinas, Monterey, or other area, please contact Kristen Jurevich at 831.635.6719

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