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I Want to Give My Daughter and Her Husband $50,000 For a Down Payment. Do I Have to Worry About the Gift Tax?

Imagine you have $50,000 to give to your daughter and her husband for a down payment on their new home. The question is, will you owe gift taxes because of your generous gesture?
Despite popular framing, the federal gift and estate taxes only apply to very wealthy households. Unless you have approximately $13 million to give away over your lifetime, these taxes likely won’t apply to you.
A financial advisor can help you navigate and plan for gift and estate taxes. Find an advisor today.
To be very clear, these are the rules for federal taxation. Every state also has its own tax laws and every tax profile is different, so make sure to speak with a financial or tax professional before making any plans for your own assets. However, there are two main issues to consider within this scenario: the mortgage process and potential gift tax implications.
Down Payments and Gifts

With the mortgage and lender process, you want to ensure that you fill out all forms and requirements correctly. It is extremely unlikely that you can complicate the title to this property, but you can certainly complicate or invalidate the loan by making a mistake.
When your daughter applies for her mortgage, the lender will go through her finances in detail. They want to know what assets she has, where they came from, what income she has and any other information related to how she will repay this debt. The down payment is intended as an indicator of this financial stability, so receiving it from a third party can raise concerns.
Many lenders have rules around who can provide the money for a down payment. It’s common for them to reject a mortgage with a gifted down payment unless that money comes from someone with a longstanding relationship to the borrower. Among other issues, this is intended to prevent fraud and money laundering. Since the borrower is your daughter, that shouldn’t be a problem.
If you are giving the money directly to your daughter you will typically either need to “season” the money or provide a gift letter. Seasoning the money means transferring it more than 60 days in advance, again as an indicator of legitimacy against fraudulent transfers. A gift letter is a document signed by both the giver and the recipient confirming that this is a unilateral transfer with no right to repayment.
The specific format of the gift letter will vary based on lender and jurisdiction, so consult an attorney about this document. A financial advisor can also potentially help you through this process.
You may also make this transfer through the loan process, making the down payment on your daughter’s behalf rather than transferring the money to her. The lender will require you and your daughter to disclose this during the loan application process. In and of itself, your gift will typically not be a problem, but failing to specify the difference between borrower and payer will almost always complicate (if not invalidate) the loan.
Gift Tax Exclusions and Exemption Limits

Beyond the rules that surround making a gift of this sort, your main consideration here is the gift tax.
This is a tax that the IRS places on unilateral transfers. If you give someone money or assets without expecting fair-value compensation in return, you have given them a gift. If you give them enough money, eventually you (the gift giver) must pay taxes on the transfer. Gift tax rates range from 18% to 40% based on the size of the gift.
However, the gift tax only applies to very few households due to a pair of important tax provisions: an annual exclusion and a lifetime exemption limit. And if you have additional questions about either, consider speaking with a financial advisor.
Annual Exclusion
The first is the gift tax’s annual exclusion. This is the amount of money you can give to someone each year regardless of gifts in past or future years. In 2023, the annual exclusion is set at $17,000 for individuals and $34,000 for married couples who file their taxes jointly. In 2024, those limits will increase to $18,000 for individuals and $36,000 for married couples.
The annual exclusion applies on a per-recipient basis. So, for example, say that you had four children. You could give each of them $17,000 in 2023 without triggering any gift taxes.
Lifetime Exemption
The lifetime gift and estate tax exemption is the amount of money you can give away over the course of your life – or at your death – without triggering either gift or estate taxes. For gifts that exceed the annual exclusion, the difference is applied to your lifetime exemption. If you give someone a gift over that year’s annual exclusion and have exhausted your lifetime exemption, you’ll owe gift taxes on the amount of money that exceeds that year’s exclusion.
In 2023, the lifetime gift and estate tax exemption is $12.92 million for individuals, which means married couples have a combined exemption limit of $25.84 million. In 2024, the exemption will increase to $13.61 million for individuals and $27.22 million for married couples. If an individual has already gifted $12.92 million over the exclusion limits by 2023, they will be able to gift another $690,000 in 2024 (not including the annual exclusion amount).
Unlike the annual exclusion, the lifetime exemption does not reset. While you can gift up to the annual exclusion each year, any remainder permanently reduces your lifetime cap. The lifetime exemption is on a per-donor basis, meaning that it applies collectively to all gifts you have given. For example, say that in 2023 you give $20,000 to each of your four children. Each gift exceeds the exclusion by $3,000. Collectively, they would lower your lifetime gift and estate tax exemption by $12,000.
Gift Taxes And Down Payments
When it comes to your daughter’s down payment, the tax issues are this: Are you married? And how much have you given away throughout your life? Let’s assume you’re single for simplicity’s sake.
First, if you give her the down payment money in 2023, the first $17,000 of the gift will automatically be free of any potential tax liability. However, since the gift exceeds the annual exclusion by $33,000, that remainder will lower your lifetime exemption.
So, for example, if you have never given anyone a taxable gift, you will pay no gift tax and your annual exclusion will be reduced to $12.887 million ($12.92 million minus $33,000). If you have already exhausted your lifetime exemption, you would have to pay taxes on the $33,000.
However, there would still be ways to manage this potential tax liability. If you could wait until 2024 to give your daughter the money, your lifetime exemption would go up to $13.61 million. You can apply the remainder to the newly raised cap and will owe no taxes on the excess gift. But if you need additional help managing your tax liability, consider working with a financial advisor.
Bottom Line
Unless you have gifted more than $12.92 million over your lifetime, you can almost certainly give a $50,000 down payment to your daughter or other family member and not owe gift taxes in 2023. Just be careful to do the paperwork right, otherwise, it could complicate the loan.
Gift Tax Tips
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Will the fact that this is your daughter complicate things? While the IRS does not treat gifts from parents differently, large gifts within a wealthy family can potentially complicate future planning around trusts and estates.
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A financial advisor can help you strategically give away assets to lower your potential estate tax liability. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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The post I Want to Give My Daughter and Her Husband $50,000 For a Down Payment. Do I Have to Worry About the Gift Tax? appeared first on SmartReads by SmartAsset.
I don’t want to leave my financially irresponsible daughter my house. Is that unreasonable?
Dear Quentin,
I am at my wit’s end and hope someone can recommend ways to help my daughter’s unwillingness to manage her money. When I am gone her chances are slim to none. I am a senior citizen and I’ve had cancer four times in the last three years, so I don’t know how much longer I have.
I already told her I’d…
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I gave my daughter $5K for her divorce but she lashed out when I said ‘no more’
Despite the ups and downs of life, as brilliantly described by Jonathan Clements, I was able to retire at 58 in 2018. My wife, who is 10 years younger, will follow me in 2024. Throughout our working years and my retirement, we have financially helped our children, who are in their mid- to late 30s. I have two daughters from my previous marriage, while my wife has a son. We try to instill fiscal responsibility but find that difficult to attain, particularly with my daughters.
Unfortunately, a recent schism occurred with my youngest daughter, who is mired in a nasty divorce. She is a stay-at-home mom raising my 2-year-old grandson. She and her husband have no savings, however; they have about $200,000 equity in their home. Initially, she asked for $5,000 to retain a New Jersey divorce attorney; her mom, my ex-wife, and I agreed to split the cost.
The schism occurred when she asked for more money to pay her attorney. I refused because the divorce has dragged out too long, and I feel like her attorney is running up the tab. She lashed with several humiliating and disrespectful texts, insinuating that I am not a loving and caring father. Moreover, her mother took her side in this quarrel. Her mother spent $36,000 renovating her home in New Jersey so my daughter and her son could move in with her after the divorce.
“‘Her mother spent $36,000 renovating her home in New Jersey so my daughter and her son could move in with her after the divorce.’”
As kind of financial therapy, I decided to run the numbers with my Quicken and found that excluding child support, I have provided over $166,000 in financial assistance to my daughters since they graduated from high school, with my youngest daughter receiving the most money ($94,000) because she decided to attend a private university in Manhattan.
Beyond college assistance, I gave money for moves, healthcare, auto breakdowns, etc. In other words, I was their emergency fund. Moreover, I decided to fund my daughters’ annual IRA with their understanding that I will need to stop if there is a significant market downturn, which I did last year and this year due to the recent bear market.
“‘I lost half my net worth due to my divorce. I dusted myself off, worked hard, saved and recovered nicely.’”
I retired as a healthcare administrator. Despite a former financial adviser who placed a good percentage of my investments in tech stocks in 2000, I lost half my net worth due to my divorce. I dusted myself off, worked hard, saved and recovered nicely. I do not have a pension; thus, I live off my investments. My wife’s public-school salary is not enough to pay for the lifestyle we have become accustomed to since my working days.
I am mindful of “sequence-of-return risk,” where the timing of my withdrawals could adversely affect my retirement income. So I use the “bucket strategy” — dividing my retirement strategy into short-, medium- and long-term needs — to help minimize that risk, although the bond portfolio bucket has taken a beating.
We presently have $2.8 million in financial assets with $2.5 million in retirement accounts. We draw $75,000 to $90,000 annually to support our lifestyle. We have no debt. Our condo is valued at $700,000. Am I right to refuse to continue to financially support my daughter’s divorce? I truly believe she should have learned to stand on her own feet by now.
Sad Dad
Dear Sad Dad,
You paid for her wedding, I presume, and now you are expected to pay for her divorce. There is a fine line between facilitator and enabler, and your instincts are telling you that you have reached that line. The logical response to an endless supply of funds is that more funds will be forthcoming. You have played a part in creating this expectation.
When you cut off the supply, your daughter will react — positively, neutrally or negatively. She could have responded in one of three ways: 1) ask you why, and thank you for all of your help in the past; 2) ask you to help her one last time, even though it may not be the last time; or 3) let loose about how the money is a representation of how much you care for her.
Ordinarily, I would say being cajoled into giving a child money — or anyone money — is a no-no, especially if they resort to name-calling or reducing the relationship to a transaction. While I disagree with her response, this is what your daughter has learned: She needs money, and you will give it to her because a) you are her father and b) your love is expressed in financial support, among other ways.
“Divorce takes a toll on a person’s mental health as well as their bank balance, so give your daughter a pass this time. But make sure it’s the last time.”
Divorce is a financially and emotionally devastating experience, and your daughter — for better or worse — is at her most vulnerable emotionally and financially. She needs to see it through, pay her attorney and, hopefully, get the best deal she can with the help of this divorce attorney. Pay for the divorce, and ask her to never send you texts like that again.
Be clear that this is the last time. Tell the truth. It gives you pleasure to help your children in life, but there comes a point where that help is becoming an emergency fund. Instead, she needs to learn how to budget and plan for unforeseen events. She may or may not be grateful, but this needs to be a milestone conversation that you can refer to for future requests.
The average cost of divorce in the U.S. hovers at $7,500, but the median is closer to $12,500. Attorney fees can range from $100 an hour to $400-plus an hour. It’s an exhausting and nasty business. While I feel your daughter has become too reliant on your financial support, given your healthy net worth, this is probably not the time to pull the plug.
“When you have all your own ducks in a row, you may consider taking out tax-advantaged 529 college-savings plans for your grandchildren. ”
Divorce takes a toll on a person’s mental health as well as their bank balance, so give her a pass this time. Assuming you are now in your early to mid-60s, you will have enough to see you through retirement, although you should talk to a financial adviser about ways you could cut down on expenses, and whether withdrawals of $90,000 a year are feasible over the long term.
You should have your own emergency fund, long-term-care insurance (taken out long before now, I hope, as the premiums increase over time), a durable power of attorney, a will and a healthcare advance directive. When you have all your own ducks in a row, you may consider taking out tax-advantaged 529 college-savings plans for your grandchildren.
There are many ways you can help your daughter without being an ATM every time she runs into trouble. Living with your ex-wife will help. As a post-divorce gift, you could pay for her to meet with a financial planner. Could she find a part-time job, if she is not working? It’s time for her to build her own emergency fund. Ultimately, she needs to embrace her newfound independence.
If she gets wind of your retirement fund, there will be no end to her requests.

The Moneyist: “Divorce takes a toll on a person’s mental health as well as their bank balance, so give her a pass this time.”
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Readers write to me with all sorts of dilemmas.
By emailing your questions, you agree to have them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
The Moneyist regrets he cannot reply to questions individually.
More from Quentin Fottrell:
Do children get 529 accounts in a divorce? My in-laws opened two plans for our kids, but their marriage is on the rocks.
I’m only interested in zero risk’: I’m inheriting $100,000. Is a 5.5% CD a good rate? Where else should I invest?
My sister squandered our parents’ millions, asked me to give her $10,000, then made me a tempting offer. Should I take it?
I will leave my daughter my house, but she doesn’t want to take over my $250,000 mortgage. Should she rent the house, or just sell it?
Dear MarketWatch,
My daughter has a similar issue that this lady is facing, whose mother left her the family home.
I will be leaving my daughter my house in my will. But she has a physical disability that affects her head and ability to work full-time, so her income is limited.
She lives in an apartment close to her work and doesn’t want to move into my house.
My house is worth $450,000, with a loan balance of $248,000, which I had recently refinanced to a 3.35% mortgage rate.
My suggestion to her is to lease the house when it ends up in her hands. She can get about $2,800 in income, and since the mortgage is just under $1,600 a month, that gives her additional income. And if she does this, that extra money would almost fully pay her rent.
Her other option is to sell, and take approximately $200,000 out of the house.
So my question is, should she sell or should she lease?
Trying My Best
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Trying,
Ask her to lease this house if you predecease her. Do not recommend that she sell it just yet.
But start working with her now so she can find her feet as a landlord, if and/or when that happens. Together you can see the best ways to find tenants, how to set up rent payments, and how to care and maintain the home.
If she’s not able to take on this responsibility, you can research a property-management company that can help you at a cost. A property-management company typically takes about 8% to 12% of the monthly rate as a fee.
I love that she has a little bit of money left over from the rent if she leases. That will boost her income, give her more financial stability, and help her to put money money aside for an emergency.
Many people in America who are renting dream of owning their own home, so you have helped to set her up for a successful and secure retirement. Plus, that 3.35% mortgage interest rate was a catch. She would be lucky to see that again soon.
I don’t know what medical issues she has, and what other financial needs she may have in the medium- to long-term, but if there’s no immediate and pressing need to draw on that $200,000, why go down that route?
I truly appreciate how much you have done — and what you are leaving behind — for your daughter. It is kind of you to give your daughter a financial leg-up by willing your home to her.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.