Parents Helping Children Buy Homes

As home prices climb and mortgage rates increase, many parents are eager to assist their children in purchasing their first home. Financial experts highlight several tax-efficient ways to provide this support.

A recent survey from LendingTree revealed that in 2026, 40% of homeowners reported receiving financial assistance for their down payments, a rise from 35% in 2023. Among younger homeowners, the numbers are even higher, with 78% of Gen Z buyers and 56% of millennials receiving help.

For many younger buyers, family is the primary source of this financial support.

Data also indicates that financial pressures are causing young people to delay important life milestones. According to a 2026 Northwestern Mutual study, 31% of Gen Z and 24% of millennials have postponed buying a house due to financial difficulties.

“It’s common with first-time homebuyers,” said Tim Steffen, a certified public accountant and director of advanced planning at Baird. “The kids struggle with down payments, leading parents or even grandparents to step in.”

Typically, inheritances happen when heirs are in their 60s, but earlier financial assistance can help younger adults, as noted by Vanguard research.

Furthermore, some investors prefer to see the benefits of their gifts while still alive, according to Abigail Gunderson, a senior wealth advisor at Tanglewood Total Wealth Management.

The Gift and Estate Tax Exemption

When giving assets to children or loved ones, you are unlikely to trigger any taxes, experts advise.

For 2026, individuals can give up to $19,000 per recipient without needing to report it to the IRS. If you exceed this limit, usually you will need to file a gift tax return. Couples can combine gifts for a total exclusion of $38,000 by filing jointly.

One strategy to maximize this limit is to make a gift at the end of the year and another at the start of the next year, as Steffen suggests: “You could do it in December and then again in January.”

However, many people don’t need to worry about gift and estate taxes even if they go over the annual exclusions, according to Steffen.

For 2026, the federal estate and gift tax exemption is set at $15 million per person, or $30 million for married couples. Estates valued below these thresholds will not incur federal estate taxes, which can reach up to 40%.

Gifts below the annual exclusions do not count against the lifetime exemptions, and payments made directly for qualified education or medical expenses are not deducted from these limits.

Lifetime Giving vs. Inheritance

When planning how to gift, it’s important to consider the type of asset and any built-in gains, experts recommend.

If you have investments with significant gains, it might be wiser to hold onto those until death instead of gifting them, Gunderson suggests. Inheriting these assets allows children to benefit from a “step-up in basis,” adjusting the original price to its value at the time of death. This strategy could help reduce capital gains taxes if they quickly sell the inherited assets.

Conversely, if you decide to gift these profitable assets during your lifetime, your children would assume a “carryover basis,” which means they would use your original purchase price when selling. However, if they earn lower incomes, their capital gains tax rate might be as low as 0%, depending on their overall earnings.

For the year 2026, single filers can earn up to $49,450 in taxable income, and married couples filing jointly can earn up to $98,900 and still enjoy a 0% tax rate on long-term capital gains.

Taxable income is calculated by subtracting the larger of the standard or itemized deductions from your adjusted gross income, which must include the sale of any profitable assets.