This is how to gift a house to a family member

If you own a piece of real estate, you may have considered gifting it to a friend or family member. For example, certain individuals make a point to gift real estate holdings after they pass away to provide for dependents, while others give homes to relatives to help enhance their quality of life.

Should you have the financial means to do so, it may be tempting to give your child a home free of charge as a life-changing gift. But before you elect to gift your house to a family member, keep in mind that financial ramifications may be attached.

Let’s take a closer look at how you can gift property without creating unnecessary expenses and overhead.

Gifting a house: An example

Let’s say a married couple that is contemplating gifting a piece of real estate that’s been in the family to their daughter as a wedding gift. The hope is that ownership of the property will help her, and her new husband get a head start in life.

Originally, the couple paid $300,000 for the property. But they’re wondering what IRS rules, guidelines, and regulations that they should be aware of before they choose to gift the home to their child, and how doing so might impact their taxes.

Basis of gifted property

In terms of taxes, it’s important to be aware of the basis of gifted property, aka the valuation at which the property is currently being taxed by the government. That’s because anytime that you gift another person property that is valued over $19,000, which is the annual gift exclusion limit, you must fill out a gift tax form. This is the limit as of 2025. You may gift up to $19,000 to as many people you like without incurring extra taxes. You can find a history of the annual gift tax exclusion amounts here.

As of 2025, there is a gift tax exemption of $13.99 million per individual. This means the parents in the above example could gift their daughter up to $27.98 million, which is equal to $13.99 million per parent, without paying any federal estate or gift tax. As a result of this exemption, the majority of U.S. taxpayers can freely gift real estate without having to deal with the real estate gift tax up-front. In 2026, this amount will be increased to $15 million per individual, which will be adjusted for inflation.

At the same time, from a tax standpoint, by gifting the property, the couple could cause their child to end up with unintended capital gains taxes down the road. For clarity’s sake: If their child ever plans to sell the home, they may be on the hook for paying hefty capital gains taxes that accrue over time as the property increases in value.

Like the IRS explains, virtually any good or item that you own and use for personal, or investment purposes is considered an asset. Gains in value (the difference between the tax-adjusted basis in the asset and the amount of money earned from the sale) can be taxed at rates of 0%, 15% or 20% depending on taxable income and whether you’ve owned the property for more than a year.

To calculate the gains, you need to know certain pieces of information including:

• The adjusted basis of the property just before the donor (in this case, the parents) made the gift.
• The fair market value (FMV) of the property (what it would be worth at sale in the current open real estate market) at the time the donor made the gift.
• The amount of any gift tax that has already been paid on the gift (See Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return).

In this situation, the parents’ tax basis of $300,000 becomes their child’s tax basis once their daughter receives the property. The couple won’t have to pay the gift tax because the tax basis on the home is much lower than their lifetime exemption.

And if their child immediately sells the property for $300,000, they won’t owe any capital gains taxes. But down the road, if the child sells the property for $450,000, they’ll owe a capital gains tax on $150,000 – the amount of value that has accrued to their benefit in the house over time.

Ways to gift real estate

Given potential out of pocket costs and tax consequences, you may be wondering: what is the best way to gift property to another person? Let’s look at four different scenarios that can help you minimize expenses and potential tax burdens.

Gift real estate

In this situation, the parents could gift the property to their daughter at her wedding as outlined above. They’d effectively transfer the title on the house to their child, who will receive the home as an outright gift.

This is the most straightforward option, but there are some downsides to using this strategy.

Can you gift someone a house without paying taxes?

When gifting real estate to family members, homeowners might wonder if they can gift someone a house without paying taxes. Using our earlier example, we’ll discuss how individuals who wish to bestow ownership of property on others may use the lifetime exemption to avoid the gift tax. Other financial strategies also can be used to avoid a heavy tax burden.

For example: Since the property’s tax basis is $300,000, it exceeds annual exemption of $19,000, and the parents gifting the property would need to fill out a gift tax form. But at the same time, as you’ll also recall, $350,000 is far below their lifetime exemption of $27.98 million, so they won’t owe any gift tax on the property transfer.

If their daughter keeps the property for personal or investment purposes, she won’t be responsible for any capital gains taxes. However, if at any time she eventually elects to sell the home at a profit, she will be responsible for paying capital gains taxes on the difference.

Sell to your loved one at a personal loss

Another option that the parents might consider is giving a gift of equity. Under this scenario, they’d effectively sell the home to their daughter at a price that rings up well below the appraised market value of the home.

Why do so? Because giving a gift of equity presents a cost-effective way for owners to gift real estate to their children or other relatives. It also offers a way to do so even if these buyers don’t have enough cash to cover a down payment or the larger monthly payment that would typically come from a home sold at market value.

For instance, the parents in our example could sell the home to their child for $100,000. Since the house is worth $300,000, they’re giving a gift of equity of $200,000.

Tax considerations

Keep in mind that there are no immediate tax consequences to giving a gift of equity. But in this situation, the child will likely have to pay long-term capital gains tax on the gift of equity. At the same time, the parents may also be able to deduct their loss from their taxable income, helping provide additional financial benefits.

Add your loved one to the deed

Another option that the parents might consider is adding their daughter to the deed to the property. Basically, under such an arrangement, they’d be giving her joint tenancy with the right of survivorship. All three individuals in this situation (parents and child) would own the property together and have equal rights to use it.

If one of the tenants dies, then the rights would automatically transfer to the surviving tenants. Assuming the child outlives their parents, they’d effectively retain full ownership of the property in this circumstance.

Tax considerations

Mind you: one of the problems of joint ownership is that it can limit your ability to make decisions about the property and how it is utilized. If, for example, their daughter wanted to sell the home down the road, she would need permission from both parents to do so.

If you aren’t careful, joint tenancy can cause relationship strains between you and your loved ones. Also, note that the IRS still considers joint tenancy as a taxable gift; if the child decided to sell the home, she would still have to pay capital gains tax.

Create a life estate

Another option for the couple would be to set up a life estate, which creates joint ownership of the property. The parents would essentially establish a life estate and make their daugther the sole beneficiary.

Under this scenario, the parents can then continue living in the home if they choose, and the title would be automatically transferred to their daughter if they die. The property would be considered an inheritance rather than a gift as well. Then if their daughter decides to sell the property, she can do so at an adjusted basis for the current market value of the real estate holding.

Tax considerations

The advantage of using this option is that, for the time being, the parents can pass on the property to their child and avoid the gift tax. However, the parents, their daughter, and her spouse would have to adjust their roles in relation to the property.

For instance, they’d have to determine who is responsible for paying for things like property taxes. The family would also have to decide amongst themselves who gets to live in the home.

How to gift real estate

If you’re considering gifting real estate to a loved one, here’s what you can expect from the process.

1. Explore your options

First and foremost, you’ll want to ensure that you fully understand all your options for gifting real estate and the tax implications that each presents for both the giver and recipient. You don’t want any unexpected surprises down the road, so be sure to take the time to learn about each option and its potential tax implications and financial ramifications.

2. Consider consulting a real estate attorney

As you are considering your options for gifting real estate, you may wish to consult with a real estate attorney. These legal professionals are experts who can help explain how each solution works, and which is best for your situation. Having an attorney on your side can help you confidently decide about the best way to transfer your property to your loved one while also minimizing potential out of pocket expenses and overall tax burdens.

Receiving a house as a gift

Let’s return to our example from before, where the parents eventually decide to give the home to their daughter as an outright gift. Since the tax basis for the home is $300,000, they won’t owe any gift taxes.

Also, their daughter can avoid paying any capital gains taxes by keeping the property. If she does choose to eventually sell the home, she’ll pay capital gains taxes on any amount that exceeds the initial $300,000 tax basis.

FAQ

Individuals thinking about gifting property typically have several frequently asked questions. Answers to the most common are below.

How do I avoid taxes when gifting property?

One option is to leverage the lifetime gift exemption. Other options might include selling property at a loss to a loved one, adding them to the deed, or creating a life estate. If you have questions about how to do so, consult with a qualified professional.

Is it better to gift or inherit property?

Typically inheriting property provides more tax-efficient benefits than receiving a real estate holding as a gift. That’s because the inheritor generally receives property at a cost basis that has been stepped up to the property’s value at the date of the deceased’s passing, which leads to lower capital gains tax.

What is the best way to transfer a property to a family member?

One of the simplest, fastest and most common ways to do so is with a quitclaim deed. It effectively lets you transfer interest in the real estate holding to the recipient without having to prove that your claim to the property is valid.

Can I transfer a deed without an attorney?

Yes, it’s possible, but consulting with a qualified legal practitioner is advised to ensure the soundness of the transaction.

Can I give someone a house for free?

Certainly, but it’s important to understand potential tax ramifications of doing so before you process the transfer, as outlined above, as doing so may create financial obligations for the recipient.

The bottom line: This gift requires a professional consult

If you’re thinking about gifting property to another person, there are several different factors that you’ll need to consider. Before effecting any such transfer, it’s important to understand the gift tax thresholds and potential responsibilities to the IRS that may be created.

In addition, you’ll also want to consider how capital gains tax works, and how it could come into play if your child sells the home. If you’re considering gifting a piece of property to a child or family member, you’ll want to be sure to consult with a lawyer or tax professional first.

Keep in mind: Before you begin the process of gifting a house to your child, it helps to explore how parents can help their children own a home.