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With house prices rising and mortgage rates soaring, many parents are looking to help their children buy their first property. And financial experts say there are some tax-advantaged ways to do so.
In 2026, 40% of homeowners said they received financial assistance with a down payment on a home, up from 35% in 2023, according to a LendingTree survey of nearly 2,000 consumers conducted in March. The percentage is even higher among younger homeowners, with 78% of Gen Z and 56% of Millennials receiving assistance.
LendingTree found that family is the main source of financial support for a down payment, especially for younger buyers.
Other data shows that economic pressures are causing young people to postpone milestones in their lives. A 2026 Northwestern Mutual survey of 4,375 U.S. adults conducted in January found that nearly one-third of Gen Z respondents (31%, compared with 24% of Millennials) have postponed buying a home due to “financial hardship or concerns.”
“We see this a lot with first-time homebuyers,” said Tim Stephan, a certified public accountant and director of advanced planning at financial services firm Baird. “The kids can’t afford the down payment, so moms and dads or even grandparents want to help.”
According to Vanguard research, inheritance typically occurs around the age of 60, but if you have few assets, you may be able to support younger generations by transferring them earlier.
Additionally, Abigail Gunderson, senior wealth advisor and certified financial planner at Tanglewood Total Wealth Management in Houston, said some investors prefer to give to families with a “warm hand” and receive benefits while they’re still alive.
According to financial experts, there are some important things to know if you’re contributing to a down payment.
Gift tax and inheritance tax exemption
Experts say it’s unlikely you’ll end up paying taxes when you gift assets to your children or loved ones.
In 2026, you can donate up to $19,000 per recipient, known as the annual gift tax exemption, without reporting it to the IRS. If your gift exceeds your annual exemption, you generally must file a gift tax return. By filing a gift tax return, the spouses can elect to divide the gift for a total deduction of $38,000.
One way to effectively double these limits is to gift near the end of the year and then again at the beginning of the following year, Stephens says. “You could give in December and then give again in January.”
But in the end, most people don’t need to worry about gift or estate taxes, even if they exceed their annual gift tax exemption amount, Stephan says.
In 2026, the lifetime exemption from federal estate and gift taxes will be $15 million for each person and $30 million for married couples. This means that an estate valued within these limits will not be liable to pay federal estate taxes, which can be as high as 40%, upon death.
Gifts below the annual exemption amount are not exempt from lifetime federal gift and estate taxes. Paying qualified education and medical expenses directly to the institution does not reduce the lifetime limit.
Lifetime gifts and inheritance
Experts say that when planning a gifting strategy, you need to consider the asset, the built-in benefit, and the type of account in which it is held.
For example, if you’re older and have investments in a brokerage account that have generated significant returns, “you may want to hang on to those assets” until you die rather than gifting them to your children during your lifetime, says Gunderson of Tanglewood Total Wealth Management.
When a child inherits an asset, they will receive what is called a step-up basis, which adjusts the original purchase price to the value at the date of death. This strategy can potentially save you capital gains taxes if you sell the property as soon as your child inherits it.
By comparison, if you gift your children the same profitable asset for the rest of their lives, when they sell that investment they will have a “carry-over basis” or original purchase price. However, if your child has a low income, they may be subject to a 0% capital gains tax rate based on their income.
In 2026, single filers can earn up to $49,450 in taxable income, and married couples filing jointly can earn up to $98,900, and long-term capital gains payments continue to be 0%.
Calculate your taxable income by subtracting the greater of your standard deduction or itemized deductions from your adjusted gross income. However, the sale of profitable assets must be included in the calculation.
