Down Payment Gift Tax 2026 Calculator

A down payment gift is money a family member or close relative gives a homebuyer to help cover the down payment, closing costs, or reserves. Per IRS Rev. Proc. 2025-32 inflation adjustments, the 2026 annual gift tax exclusion is $19,000 per donor per recipient, and the lifetime estate and gift tax exemption is $13.99 million. Most down payment gifts owe zero tax because the excess simply reduces the donor's lifetime exemption rather than triggering an immediate tax bill.

2026 IRS Gift Tax Rules

The annual exclusion lets each donor give up to $19,000 per recipient per year with no reporting. A married couple can combine to $38,000 per recipient using gift-splitting (both spouses sign Form 709). Gifts above the annual exclusion don't trigger immediate tax — they reduce the donor's lifetime exemption ($13.99M in 2026). Tax is only owed if the donor exceeds the lifetime exemption, which is virtually impossible for typical households. Form 709 must be filed by April 15 of the following year for any gift exceeding the annual exclusion, even if no tax is owed.

Fannie Mae B3-4.3-04 Gift Letter Requirements

For conventional loans, Fannie Mae Selling Guide section B3-4.3-04 requires the gift letter to state: (1) the dollar amount of the gift, (2) the date the funds were or will be transferred, (3) the donor's name, address, phone, and relationship to the borrower, (4) a statement that no repayment is expected. The donor must also provide proof of funds (recent bank statement showing the donation amount on deposit) and proof of transfer (wire receipt or canceled check). FHA, VA, and USDA loans use similar documentation under HUD 4000.1, VA Pamphlet 26-7, and USDA HB-1-3555.

Acceptable Donor Relationships By Loan Program

Conventional and FHA loans accept gifts from spouse, child, dependent, fiancé(e), domestic partner, parent, grandparent, sibling, aunt/uncle, cousin, or close family-equivalent friend with documented relationship. Employer-supplied gifts are allowed if the employer is a labor union or charitable organization. Gifts from interested parties (seller, builder, real estate agent in the transaction) are prohibited. VA loans accept gifts from anyone with no relationship restriction. Conventional loans on a primary residence require no minimum borrower contribution if the loan-to-value ratio is 80% or below; above 80% LTV and on second homes, the borrower must contribute at least 5% from their own funds.

Common Mistakes To Avoid

(1) Skipping Form 709 — even with no tax due, gifts over $19,000 require the form; IRS penalties for non-filing accrue interest indefinitely. (2) Wire from donor's account to closing agent — never let the gift pass through the borrower's account without proper documentation; some lenders require the wire to go directly to the title/escrow company. (3) Treating cash as a gift — undocumented cash deposits trigger underwriting red flags; always use bank-to-bank transfer. (4) Confusing gift with loan — the gift letter must explicitly state "no repayment expected"; any implied repayment converts it to debt and disqualifies it. (5) Missing the seasoning requirement — if funds were transferred more than 60 days before application, no sourcing required; otherwise the donor's bank statement is mandatory.

Last updated May 2026. Sources: IRS Form 709 instructions (2026), IRS Rev. Proc. 2025-32, Fannie Mae Selling Guide B3-4.3-04, HUD Handbook 4000.1.