The 2026 federal annual gift exclusion is $19,000 per donor per recipient. Two parents can each gift $19,000 to one adult child in the same calendar year, totaling $38,000, without filing Form 709 or touching the lifetime exclusion. Understanding this number, and the rules that surround it, is the starting point for every family navigating a NYC condo purchase where parents are funding the down payment.
In my experience working with parent-purchaser families at Keller Williams NYC, the gift documentation step is the one that most commonly delays closings. Not because the money is unavailable, but because the gift letter arrives incomplete, the funds were not seasoned in the borrower's account long enough, or the CPA was not looped in early enough to advise on whether Form 709 was needed. Getting ahead of these issues before the contract is signed is the right approach.
This article covers the federal gift tax framework, how to split gifts across calendar years to maximize the annual exclusion, what lenders require in a gift letter, and the seasoning rules that govern when gifted funds must arrive. For the broader parent-purchase framework, see the complete parents buying guide.
Tax Disclaimer
This is general framing, not tax advice. Form 709 filing rules, exclusion amounts, and state-level gift tax treatments change. The 2026 lifetime exclusion figure referenced here reflects current law, which is scheduled to change at the end of 2025 unless Congress acts. Consult a CPA before any gift transfer exceeding $19,000 per donor per recipient, and before closing on any transaction involving gifted funds.
The 2026 Federal Gift Tax Framework
Federal gift tax operates on two tiers. The annual exclusion is the amount any one person can give to any one recipient in a calendar year without any filing obligation or impact on the lifetime exclusion. In 2026, that number is $19,000 per donor per recipient. Two parents can each independently use their $19,000 exclusion with the same recipient, so a couple gifting to one adult child can transfer $38,000 per year, per child, with zero paperwork.
Above the annual exclusion, gifts count against the lifetime exclusion. In 2026, the federal lifetime exclusion is approximately $13.99 million per individual. Amounts given above the annual exclusion in any year require the donor to file Form 709 (United States Gift and Generation-Skipping Transfer Tax Return). Filing Form 709 does not mean tax is owed immediately; it means the excess amount is recorded against the lifetime exclusion. Gift tax is only actually paid when total lifetime gifts above the exclusion exceed the lifetime threshold, which most families will not approach.
One important note on the lifetime exclusion: the Tax Cuts and Jobs Act of 2017 roughly doubled the lifetime exclusion, and that increase is scheduled to sunset at the end of 2025 unless Congress extends it. If the sunset takes effect, the per-person lifetime exclusion reverts to approximately half the current level. Families considering large gifts should consult an estate planning attorney about whether to act before any potential sunset. Confirm the current figure with your CPA at the time of your transaction.
New York State has no gift tax. NY does have an estate tax with a relatively low exemption threshold (approximately $7.16 million in 2026), but lifetime gifts are not subject to NYS gift tax. This differs from a handful of other states that do impose state-level gift taxes, and it is a meaningful advantage for NYC transactions where parents are based in New York.
Splitting Gifts Across Calendar Years
For families with larger down payments to fund, the calendar year is a structuring tool. Because the annual exclusion renews on January 1 of each year, a family can double the tax-free transfer by timing gifts around year-end.
Two parents gifting to one child can transfer $38,000 per year without any Form 709 filing. If the parents gift $38,000 in late December of one year and another $38,000 in early January of the following year, the family has transferred $76,000 in total across two calendar years with no filing obligation and no impact on either parent's lifetime exclusion. The timing has to be genuine: the December gift must actually leave the donor's account in December, not be backdated.
If the child is married, the parents can also gift to the child's spouse. Two parents gifting to a child and a child's spouse can transfer $76,000 per year ($19,000 x 2 donors x 2 recipients). Over two calendar years, that is $152,000 transferred with no filing requirement. Many NYC down payments in the condo market, where closing costs on a $1.5 million purchase run $90,000 to $120,000 beyond the down payment itself, can be substantially covered through disciplined use of the annual exclusion over two to three years.
The Gift Letter: What Lenders Require
Every mortgage lender that accepts gifted funds for a down payment requires a gift letter. The letter is the donor's written confirmation that the funds are a gift, not a loan. A loan would affect the borrower's debt-to-income ratio and must be disclosed separately; an undisclosed loan structured as a gift is mortgage fraud. Lenders take this seriously and cross-check the letter against the paper trail of actual fund transfers.
A compliant gift letter must include: the exact dollar amount of the gift; the donor's full name, address, phone number, and relationship to the borrower; the property address being purchased; a clear statement that no repayment is expected or required; the donor's signature and date; and the account number and bank name from which the funds will be or have been transferred. Some lenders also require a copy of the donor's bank statement showing the funds leaving the account, and a copy of the borrower's bank statement showing the funds arriving.
Sample Gift Letter Language
I/We, [Donor Full Name(s)], of [Donor Address], hereby certify that a gift of $[Amount] has been made to [Borrower Full Name], my/our [relationship, e.g., son/daughter], for the purpose of purchasing property located at [Property Address]. This gift does not need to be repaid and no repayment is expected. These funds were transferred from [Donor Bank Name], account ending in [last 4 digits].
Donor Signature: __________________ Date: __________
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Seasoning Requirements
Seasoning refers to how long funds must sit in the borrower's bank account before the lender will accept them as part of the down payment without requiring a full paper trail explanation. Most conventional lenders, following Fannie Mae and Freddie Mac guidelines, consider funds "seasoned" if they have been in the borrower's account for 60 days or more. If a large deposit appeared in the account within the prior 60 days, the lender will ask for documentation of its source. A gift letter covers it, but you will also need the paper trail showing the transfer.
Some lenders accept "gift at closing" arrangements, where the funds transfer directly to the title company or escrow agent at closing rather than passing through the borrower's account in advance. This simplifies the seasoning question but requires stricter real-time documentation: the lender will need a certified check or wire confirmation from the donor's account at closing, along with the gift letter. Not all loan programs permit gift at closing; confirm with your mortgage officer whether this option is available for your specific program.
Recent large deposits in a borrower's account that are not explained and documented are among the most common causes of last-minute underwriting delays in NYC condo transactions. The fix is simple: tell your mortgage broker about any anticipated gifts early in the process, not after the application is submitted.
Gift vs Loan vs Equity-on-Title
| Scenario | 2026 IRS Treatment | Lender Documentation |
|---|---|---|
| Single parent gifts $19K to child | No filing required | Gift letter plus bank records |
| Two parents gift $38K to child | No filing required | Gift letter from each donor |
| Two parents gift $100K to child | Form 709 required; $62K counts against lifetime exclusion | Gift letter plus bank records; possible CPA review |
| Two parents gift $500K to child | Form 709 required; $462K counts against lifetime exclusion | Gift letter plus bank records; likely lender underwriting scrutiny |
Three distinct structures cover most family funding scenarios for NYC condo purchases. Each has trade-offs.
A gift is the simplest arrangement. The money transfers to the child, the gift letter documents it, and the child owns the asset outright. The parent has no claim on the property. If the child's financial or personal circumstances change, the parent cannot claw back the gift. Families who are comfortable with this outcome generally find the gift structure the cleanest administratively.
An intra-family loan is an alternative that preserves the parent's legal claim on the funds. The IRS requires the loan to carry at least the Applicable Federal Rate (AFR), a published monthly rate well below market mortgage rates. The loan must have a written promissory note, a defined repayment schedule, and actual payments made. A loan that looks like a gift to the IRS will be recharacterized as one. If the family can commit to the documentation rigor, an intra-family loan lets the parent recover the funds if needed while keeping the interest rate low for the child.
Equity-on-title means the parent takes a fractional ownership interest in the property equal to their contribution. If the parent contributes $300,000 toward a $1.2 million purchase, the parent might hold a 25 percent tenancy-in-common interest. This creates the cleanest record of the investment and the clearest entitlement to appreciation, but it also means the parent is a co-owner who must consent to any sale or refinance. For families where the intent is eventual transfer of equity to the child, annual gifting of fractional interests (staying within the annual exclusion) can accomplish that transfer over time.
For related closing cost considerations, see the NYC closing costs guide and the mansion tax guide. For the attorney's role in structuring these arrangements, see the NYC real estate attorney guide.
| Question | Answer |
|---|---|
| What is the 2026 federal annual gift exclusion? | $19,000 per donor per recipient per calendar year. Two parents can each give $19,000 to one child, totaling $38,000 per year, with no Form 709 filing required and no impact on the lifetime exclusion. |
| Do I have to pay tax on a gift from my parents? | No. The recipient of a gift does not pay federal income tax or gift tax on the amount received. Gift tax, if owed at all, is the responsibility of the donor. For amounts above the annual exclusion, the donor files Form 709, which records the excess against their lifetime exclusion. Tax is only actually paid when lifetime gifts above the exclusion surpass the lifetime threshold. |
| What goes in a gift letter for the mortgage lender? | The gift amount, donor's full name and address, donor's relationship to the borrower, the property address, a clear statement that no repayment is expected, the donor's signature and date, and the bank account from which the funds were or will be transferred. Some lenders also require the donor's bank statement and a copy of the wire or transfer confirmation. |
| How long must gifted funds be in my account before closing? | Most conventional lenders following Fannie Mae/Freddie Mac guidelines require 60 days for funds to be considered seasoned. Funds in the account less than 60 days require documentation of source, including the gift letter and transfer records. Some lenders permit gift at closing with real-time documentation; confirm with your mortgage officer. |
| Does New York charge gift tax? | No. New York State does not impose a gift tax. NY does have an estate tax with a relatively low exemption, but lifetime gifts are not subject to New York State gift tax. This differs from a small number of other states that do impose state-level gift taxes. |
Ready to Structure the Down Payment?
Milton Coste, Licensed Real Estate Associate Broker at Keller Williams NYC, coordinates with your CPA and mortgage broker to keep the documentation in order from contract to close. Call (917) 416-7433 or email [email protected].
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