The rules for using down payment gifts differ depending on which lender you use and whether your loan is guaranteed by Fannie Mae, Freddie Mac, or FHA. If you’re the one making the down payment gift, you won’t have to pay federal income tax, nor will the recipient, as long as you give $13,000 or less in 2011 or 2012. You can give up to $13,000 per person without tax implication to any number of people in one year.
In addition, you and your spouse can each give separate gifts to your child. The IRS calls this gift splitting. For instance, if you’re planning to give to your two children, you and your spouse can each give each child up to $13,000 for a total of $52,000 ($13,000 x 4), says CPA Sue Medicus, owner of Liberty Tax Service in Catonsville, MD. If you want to give more, you still may not owe taxes, but you have to inform the IRS of your gift using Form 709. Check with your tax adviser to see if the amount above $13,000 counts against a lifetime exclusion that we all get to use to pass along assets via gifts and estates, Medicus says. You can’t deduct the value of gifts you make (other than gifts that are deductible charitable contributions) or any federal gift resulting from making those gifts. For more, IRS Publication 950 outlines the rules about gift and estate taxes (Houselogic).
