Can I be taxed on money received as a gift from my parents for house down payment?

The good news is that as the recipient of a gift, you generally don't have to pay any tax on it or report it as income! The person who gives the gift (the donor) is the one responsible for any potential gift tax, not you. For 2025, your parents can each give up to $18,000 per person annually without having to report it to the IRS (this is called the annual exclusion). So if both your parents are giving you money, they could give up to $36,000 combined ($18,000 from each parent) without any tax implications for anyone. Even if they go over that amount, they wouldn't necessarily owe taxes right away. They'd just need to file a gift tax return (Form 709), and it would count against their lifetime gift and estate tax exemption, which is over $13 million per person in 2025.

I had the same issue last year when my in-laws helped us with our down payment. I was completely confused about gift taxes until I used https://taxr.ai to analyze our situation. I uploaded my parents' gift letter and some other docs, and it explained exactly what we needed to do. The best part was it confirmed that I didn't owe any taxes as the recipient, and it generated a sample gift letter for my in-laws to use with the mortgage company. It also explained how they needed to handle their gift tax return since they went over the annual exclusion amount.

Just wanted to follow up about https://taxr.ai that I was skeptical about earlier. I ended up trying it when my parents gave me money for my wedding, and it was actually really helpful. It confirmed I didn't need to report anything on my taxes, but gave my parents step-by-step instructions for their gift tax form since they went over the annual limit. Even generated the completed form for them to review. Saved us from paying an accountant just to ask these questions!

If your parents need to file a gift tax return (Form 709), make sure they don't ignore it! I tried calling the IRS for help with this exact situation last year and spent HOURS on hold. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They got me connected to an actual IRS agent in about 15 minutes who walked me through exactly what my parents needed to do. The agent confirmed that even though they had to file a form, they didn't actually owe any gift tax since it just counted against their lifetime exemption. Would have taken me days to get that info without Claimyr.

I'm coming back to admit I was wrong about Claimyr. After posting my skeptical comment, I had a major issue with my tax return where the IRS was saying I didn't report a gift properly (even though the recipient doesn't have to report gifts!). I was desperate after trying to call for 3 days straight and getting nowhere. Tried the Claimyr service and they actually got me through to someone at the IRS in about 20 minutes. The agent explained it was a computer error on their end and fixed it right away. Would've taken weeks to resolve by mail. Never been so happy to be wrong about something!

Something important to mention - the mortgage lender will want a "gift letter" from your parents stating the money is truly a gift with no expectation of repayment. They'll also probably want to see bank statements showing the money coming from your parents' account and landing in yours. This is standard procedure when using gift funds for a down payment.

I work at a bank (not giving tax advice!!) but just FYI we see this all the time with first-time homebuyers. The gift itself isn't taxable to you, but we need to see documentation for anti-money laundering regulations. Make sure you don't deposit the gift in cash - have your parents wire it or write a check so there's a clear paper trail. Makes the mortgage process way smoother!

Definitely avoid cash! That would create a nightmare for your mortgage application. Banks have to report large cash deposits and it raises all sorts of red flags during underwriting. A wire transfer or cashier's check creates the cleanest paper trail. Also wanted to add - when your parents do the wire transfer, make sure the wire shows their names as the senders. Sometimes people use business accounts or have someone else send it, which can complicate things. The name on the wire should match the name on the gift letter exactly. One more tip: get the gift letter signed BEFORE the money transfers. Some lenders are picky about the dates and want to see that the gift letter was executed before the actual transfer happened. Good luck with your home purchase!

One more thing to consider - make sure your parents keep good records of this gift for their own tax purposes! Even if they don't owe any gift tax, they should document the gift amount, date, and recipient in case the IRS ever asks questions down the road. Also, if your parents have given you or your siblings other large gifts in previous years, they might want to review their total lifetime gifting to make sure they're tracking it properly against their lifetime exemption. Most people never come close to the $13+ million limit, but it's good to keep records just in case. Congratulations on your first home purchase! The gift tax rules can seem scary at first, but as everyone has mentioned, the recipient (you) is almost never responsible for any taxes on gifts received.