If you’re considering gifting $75,000 to help a family member with a mortgage down payment, understanding gift tax rules is essential. The good news? Unless you’ve gifted over $13.61 million in your lifetime, this amount won’t trigger an immediate federal gift tax. With generous lifetime and annual exemptions, most families won’t owe any gift or estate tax. Here’s how it works and what you should know.
What Is the Gift Tax?
The IRS imposes a tax on gifts where no fair market value is received in return. This includes:
- Gifts given during your lifetime (gift tax)
- Transfers made upon death (estate tax)
Gift tax rates range from 18% to 40%, but only apply if lifetime gifts exceed $13.61 million (2024 limit). The IRS also allows annual gifts of up to $18,000 per recipient without affecting the lifetime exemption. Any gift above this annual threshold reduces your lifetime exemption.
How the Gift Tax Affects a $75,000 Down Payment Gift
A $75,000 gift to a child for a down payment exceeds the $18,000 annual exclusion by $57,000. However, this amount only reduces your lifetime exemption—bringing it down to $13,553,000—without triggering an immediate tax. As long as total lifetime gifts stay under $13.61 million, no tax applies.
Gift Splitting with a Spouse
For married couples, gift splitting can simplify the process. You and your spouse can each give up to $18,000 to as many recipients as you wish annually, or a total of $36,000 per recipient. In this case, each spouse’s lifetime exemption would be reduced by half of any amount over the annual exclusion.
Gift Splitting for Married Couples
Married couples can simplify gifting by splitting the amount. Each spouse may gift $18,000 per recipient annually, allowing a combined $36,000 per recipient before impacting the lifetime exemption. Any remaining balance above this limit is split between both spouses’ exemptions.
Down Payment Gifts: What Lenders & the IRS Require
When gifting a down payment, proper documentation is crucial for both tax and mortgage approval purposes.
1. Provide a Gift Letter
Lenders require a gift letter stating that the funds are a gift, not a loan. Loans affect a borrower’s debt-to-income ratio, so clarity prevents mortgage delays.
2. “Season” the Funds in the Recipient’s Account
Transferring gift funds at least 60 days before mortgage application helps avoid lender concerns. This seasoning period ensures the money appears as a stable asset in the borrower’s account.
Real-Life Gifting Scenarios
Example 1: Single Person With No Prior Gifts
| Status | Single |
| Lifetime Exemption Used | $0 |
| Taxes Owed | $0 |
With no previous gifts, a $75,000 down payment gift simply reduces the lifetime exemption by $57,000, with no tax liability.
Example 2: High-Net-Worth Individual Exceeding Exemption
| Status | Single |
| Lifetime Exemption Used | $13.60 million |
| Taxes Owed | $9,880 |
Since this individual exceeded the exemption, the $57,000 excess is taxed at approximately 24%, resulting in $9,880 in gift taxes
Example 3: Married Couple Using Gift Splitting
| Status | Married, Joint Filers |
| Lifetime Exemption Used | $0 |
| Taxes Owed | $0 |
By splitting the $75,000 gift, each spouse applies part of their $18,000 exclusion, reducing lifetime exemptions by just $19,500 each—with no tax owed.
Maximizing Tax-Free Gifting & Estate Planning
A $75,000 gift is well below federal tax thresholds, but proper documentation is still necessary. As of 2024, the IRS allows:
- $18,000 annual gifts per recipient
- $13.61 million in lifetime gifts before taxation
Working with a financial or tax advisor can help structure gifts efficiently and ensure compliance with IRS rules.
Bottom Line
Most families won’t owe gift taxes on a $75,000 down payment gift, thanks to the generous lifetime exemption. However, proper documentation is key for both tax purposes and mortgage approval. By understanding annual and lifetime exemptions, you can make tax-efficient gifts while helping loved ones achieve homeownership.
If you’re receiving a down payment gift, make sure you’re getting the best loan terms. Contact us today to explore your mortgage options!
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