Parents’ down-payment help brings gift-tax questions

parents help – As home prices soar in Greater Boston, more parents are stepping in to help adult children buy homes. But tax professionals warn that large gifts—whether cash for a down payment or even paying for a house—can carry federal estate and gift-tax rules, along with

For many families. the moment comes quietly: an adult child finally finds a home—but the down payment math still doesn’t work. In Greater Boston. where the median sales price of a single-family home has climbed to more than $1 million this spring. up from $989. 500 last April. that help increasingly arrives from parents.

Debby Belt. a senior associate at Hammond Residential Real Estate in Chestnut Hill. said that in about half of her transactions. parents are contributing in some capacity to help their kids buy a home—especially first-time buyers. In her experience. she’s also seen gifts as high as $2 million. including parents contributing toward a down payment or even paying the whole amount for the house.

The shift is also showing up in national data. A LendingTree survey released in April found that 40 percent of homeowners nationally got help with their down payment this year. up from 35 percent in 2023. The survey also found that 78 percent of Gen Z homeowners (up to age 29) received down-payment help. while 56 percent of millennials (30 to 45 years old) did. More than one in three survey respondents said they couldn’t have bought their home without help.

Matt Schulz, LendingTree’s chief consumer finance analyst, tied the trend to pressure from high prices and tough competition. “Prices are high. competition is tough. and even people with solid incomes can struggle to save enough for a down payment. ” he said. adding that some buyers are turning to their parents because. for them. it’s the only way buying a home is even possible.

But the bank of Mom and Dad comes with fine print. Tax professionals warn that the way a gift is structured—cash versus a house, gifts made during life versus transfers at death—can shape what taxes come due later and who is responsible.

At the federal level, the rules start with what happens if a home is passed down after death. Nationally, every person has a lifetime exemption known as the unified credit. For people dying in 2026, that exemption is $15 million. That exemption applies to gifts made during a person’s lifetime as well as estate assets transferred at the time of death. effectively tracking taxable gifts and reducing the amount that can be transferred without federal estate taxes when the person dies.

In one example given in the report. if someone gave $5 million worth of taxable gifts during their life and then died with a taxable estate valued at $25 million. the $5 million would be deducted from the unified credit. leaving $10 million. Anything above that—potentially the remaining $15 million—could be subject to federal estate taxes. But if the person died with a taxable estate of just $10 million, there would be no federal estate taxes due.

Massachusetts adds another layer. Estate taxes apply to gross estates of more than $2 million for people dying on or after Jan. 1, 2023, meaning someone could potentially be liable for both federal and Massachusetts estate taxes.

Katherine Dorval, a trust and estate attorney with Bowditch & Dewey in Worcester, said many Massachusetts residents face estate taxes because the threshold is so low and real estate values are so high.

When parents help while they’re still alive, the framework shifts to federal gift tax rules. For 2026. a person can give $19. 000 per person per year—called the annual exclusion—without having to report it to the IRS. So for a married couple giving cash to a child to purchase a home. each parent could give $19. 000 for a total of $38. 000. Gifts at or below that level don’t require a gift tax return to be filed and don’t use up lifetime unified credit.

Dorval also emphasized a common misunderstanding: the $19,000 figure is not a limit on how much someone can gift. It’s the point where the IRS begins paying attention, meaning for gifts above $19,000, a gift tax return is required.

Under federal gift tax rules, federal gift taxes are paid by the donor, not the recipient—but only if the donor exceeds the $15 million lifetime exemption. Massachusetts does not have an additional state gift tax.

A gift, the report notes, is made anytime someone gives something away for less than its fair market value without expecting anything of equal value in return.

There’s also a big difference in what happens to taxes when the home is received through a gift. If a parent gifts a child a house, the child receives a carryover basis for the asset. In practical terms. that means the child steps into the parents’ shoes and “inherits” their basis—total financial investment—for the house. The report illustrates it this way: if a parent’s adjusted basis for a house is $1 million and the parent gifts it to a child. the child is treated as having a $1 million net value and would have to pay capital gains taxes over that amount when the house sells. unless the child qualified for an exclusion from capital gains under the Internal Revenue Code. The lower the net value, the higher the capital gains tax bill.

Compare that with what happens when a parent dies and a child inherits the house. In that scenario. the child gets a “stepped-up” basis to the fair market value as of the date of the parent’s death. If the house is sold immediately, the capital gains taxes due may be significantly reduced—or even zero.

For parents nearing retirement, the decision isn’t just about taxes. Julian B. Morris. a certified financial planner with Concierge Wealth Management in Boston. warned that a monetary gift removes money from future flexibility. “Once that money is out the door. it’s no longer available for things like retirement. health care. or unexpected personal needs. ” he said. “Question what your life will look like after the gift — your generosity shouldn’t come at the expense of your own financial security.”.

The reality is that for many buyers in places like Boston, help may be the only path to ownership. The challenge for families is making sure the path to a front door doesn’t open an unexpected bill somewhere else—either for the donor under federal and Massachusetts rules. or for the recipient later when the home is sold.

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