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As home prices rise and mortgage interest rates spike, many parents want to help children buy their first property. And there are several tax-friendly ways to do it, according to financial experts.
In 2026, 40% of homeowners said they received financial help with a home down payment, up from 35% in 2023, according to a LendingTree survey that polled about 2,000 consumers in March. The rate is even higher among younger homeowners, with 78% of Gen Zers and 56% of millennials getting assistance.
Family is the main source of down payment financial support, especially for younger buyers, LendingTree found.
Other data shows financial pressures are causing younger generations to postpone life milestones. Nearly a third, 31%, of Gen Z and 24% of millennial respondents have delayed buying a house due to “financial challenges or concerns,” according to a 2026 Northwestern Mutual study that polled 4,375 U.S. adults in January.
“We see it a lot with first-time homebuyers,” said certified public accountant Tim Steffen, director of advanced planning at financial services firm Baird. “The kids can’t afford the down payments, so Mom and Dad, or even grandparents, want to help out.”
While inheritances typically arrive when heirs are around 60, earlier transfers can support younger adults when they have fewer resources, according to Vanguard research.
Plus, some investors prefer to give to family with a “warm hand,” so they can see the benefits while still living, said certified financial planner Abigail Gunderson, senior wealth advisor at Tanglewood Total Wealth Management in Houston.
Whether you’re contributing to a down payment, here are some key things to know, according to financial experts.
The gift and estate tax exemption
When gifting assets to children or other loved ones, you’re unlikely to trigger a tax bill, experts say.
For 2026, you can give up to $19,000 per recipient, known as the annual gift tax exclusion, without reporting it to the IRS. If your gifts exceed the yearly exclusion, you generally must file a gift tax return. Spouses can elect to split gifts for a combined $38,000 exclusion by filing a gift tax return.
One way to effectively double those limits is to gift close to year-end and again at the beginning of the following year, according to Steffen: “You could do it in December and do it again in January.”
But ultimately, most people don’t have to worry about gift and estate taxes, even if you exceed the annual gift tax exclusions, Steffen said.
For 2026, the lifetime federal estate and gift tax exemption is $15 million per person, or $30 million combined for married couples. That means estates valued under these limits won’t owe federal estate taxes after death, which can be as high as 40%.
Gifts below the annual exclusions won’t count against your lifetime federal gift and estate tax exemptions. Payments made directly to institutions for qualified education or medical expenses also won’t reduce your lifetime limits.
Lifetime giving vs. inheritance
When planning your gifting strategy, you’ll want to consider the asset, any built-in gains and the type of account in which it’s held, experts say.
For example, if you’re older and have brokerage account investments with large gains, “you may want to just hang on to those assets” until death rather than gifting to your kids during life, said Gunderson with Tanglewood Total Wealth Management.
When your kids inherit the assets, they’ll receive a so-called “step-up in basis,” which adjusts the original purchase price to the date-of-death value. The strategy could save on capital gains taxes if your children sell assets immediately upon inheriting them.
By comparison, if you gift your kids the same profitable assets during life, they’ll have a “carryover basis,” or your original purchase price, when they sell the investments. However, if children have lower incomes, their capital gains tax rate could be as low as 0%, depending on their earnings.
For 2026, single filers can earn up to $49,450 in taxable income — or $98,900 for married couples filing jointly — and still pay 0% for long-term capital gains.
You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income. But you must include the sale of profitable assets in the calculation.
