The short answer: On November 5 the IRS announced that the annual gift tax exclusion rises to $20,000 per recipient in 2027, up from $19,000 in 2026. Because the exclusion resets every calendar year, a parent who gives a child $19,000 before December 31 and another $20,000 on or after January 1 stays within the exclusion both years. If that money is headed toward a down payment, the tax side is only half the job: your child's lender will want a signed gift letter and a clear paper trail for every dollar.

As of November 7, 2026. Figures are from IRS Revenue Procedure 2026-35 and the IRS gift tax FAQ. This is general information, not tax advice; check your situation with a CPA.

What did the IRS announce?

Every fall the IRS adjusts dozens of tax figures for inflation. The 2027 numbers came out on November 5 in Revenue Procedure 2026-35. For families thinking about helping with a home purchase, two of them matter most (IRS, November 5, 2026):

  • Annual gift exclusion: $20,000 per recipient for gifts made in calendar year 2027, up from $19,000 in 2026.
  • Basic exclusion amount (the lifetime estate figure): $15,480,000 for people who die in 2027, up from $15,000,000 in 2026.

The annual exclusion is per giver, per recipient. A married couple can each use their own, which is why the IRS lists $38,000 per recipient for two spouses in 2026 (IRS gift tax FAQ). For 2027 that becomes $40,000.

How do a December gift and a January gift add up?

The exclusion runs on the calendar year, not on your child's escrow timeline. The IRS says gift and generation-skipping taxes "must be figured and filed on a calendar-year basis" (IRS Instructions for Form 709). So a gift dated in December 2026 uses the 2026 exclusion, and a gift dated in January 2027 uses the new one.

Here's what that looks like in a few hypothetical family setups, using only the IRS figures above:

Hypothetical: gifts within the annual exclusion, 2026 vs. 2027

  • Given in 2026
  • Given in 2027
$19,000$20,000One parent to one child$38,000$40,000Two parents to one child$76,000$80,000Two parents to child and spouse
Hypothetical illustration: annual exclusion multiplied by the number of givers and recipients. Gifts to a child's spouse count only if that spouse is a real recipient of the gift. Source: IRS Rev. Proc. 2026-35 (November 5, 2026) and IRS gift tax FAQ

In the last example, two parents giving to their married child and that child's spouse in both December and January would move $156,000 within the annual exclusions ($76,000 plus $80,000). That's arithmetic, not a recommendation; whether it makes sense depends on your own finances, and your CPA should weigh in.

What if we give more than the exclusion?

That's common with California home prices, and it usually means paperwork, not an immediate tax bill. If you give one person more than the annual exclusion in a year (other than your spouse), you generally file Form 709, due April 15 of the following year. Spouses don't file a joint gift tax return; each files their own, and electing to "split" gifts requires a return no matter the amount (IRS Instructions for Form 709). The IRS notes the donor, not the recipient, is generally responsible for any gift tax, and the basic exclusion for gifts in calendar year 2026 is $15,000,000 (IRS gift tax FAQ). How a large gift is applied against that lifetime amount is a question for your tax preparer, and I'd ask it before you wire the money, not after.

What about California? There's no state gift tax to plan around today. The State Controller's Office says it continues to collect California gift tax only "for gifts made prior to June 8, 1982" (California State Controller).

What will my child's lender need?

This is where I see families get tripped up. The IRS and the lender care about different things. For a conventional loan sold to Fannie Mae, the gift rules look like this (Fannie Mae Selling Guide B3-4.3-04):

  • Who can give: a relative (by blood, marriage, adoption or legal guardianship), or someone with a familial relationship such as a fiancé or domestic partner. Not anyone connected to the builder, developer or real estate agent.
  • A gift letter: signed by the donor, with the gift amount, a statement that no repayment is expected, and the donor's name, address, phone number and relationship.
  • Proof the money moved: for example, a withdrawal from your account matched to a deposit in your child's, a wire to the escrow company, or your check to the closing agent.
  • How much can be gifted: on a one-unit primary home, Fannie Mae doesn't require any minimum contribution from the buyer's own funds, so the whole down payment can be a gift.

And don't try to make a gift look like savings. Lenders review recent bank statements, usually the last two months, and a single deposit larger than 50% of the borrower's monthly qualifying income has to be explained (Fannie Mae Selling Guide B3-4.2-02). A December gift and a January gift are easy to document if you keep the records. FHA, VA and jumbo loans each have their own gift rules, so ask before you move money.

When should we do each step?

A year-end gift plan for a 2027 home purchase

  1. 1

    Now through December 31, 2026

    Plan and make any 2026 gift

    • Talk to your CPA about amounts
    • Transfer by check or wire, not cash
    • Save statements from both accounts
  2. 2

    January 1, 2027 or later

    Make any 2027 gift

    • 2027 exclusion is $20,000 per recipient
    • Same paper trail as before
  3. 3

    When your child applies

    Give the lender the gift letter

    • Signed letter for each gift used
    • Transfer records for each deposit
  4. 4

    By April 15, 2027

    File Form 709 if needed

    • Gifts over $19,000 to one person in 2026
    • Or if you and your spouse split gifts
General timeline; your CPA and loan officer may need more. Source: IRS Rev. Proc. 2026-35; IRS Instructions for Form 709; Fannie Mae Selling Guide B3-4.3-04

If you're still deciding between a gift, co-signing or co-borrowing, I walked through the trade-offs in Helping Your Adult Child Buy a Home. And if the help is really about the family home itself, Prop 19's property tax rules come into play; see Inheriting Your Parents' California Home.

Derek\'s take

Most of the parents I talk with aren't worried about gift tax. They're worried about doing it in a way that doesn't slow down their kid's loan. My advice is simple: decide the amount with your CPA, move the money in a way that leaves a clean trail, and tell the loan officer about it up front. A gift that's documented the right way is one of the easiest things in a file to approve. A surprise deposit nobody mentioned is one of the most frustrating. If you're planning to help a child buy in 2027 and want to map out the timing and the paperwork, book a call with me. Thirty minutes, no credit pull, no obligation.

Frequently asked questions

What is the gift tax exclusion for 2027?

$20,000 per recipient for gifts made in calendar year 2027, up from $19,000 in 2026, according to IRS Revenue Procedure 2026-35, announced November 5, 2026. A married couple can each give that amount to the same person.

Can I give $19,000 in December and $20,000 in January?

Yes, as far as the annual exclusion goes. It applies per calendar year, so a December 2026 gift uses the 2026 exclusion and a January 2027 gift uses the 2027 exclusion. Keep records of both, because your child's lender will ask about each deposit.

Does my child pay tax on a gift?

The IRS says the donor is generally responsible for paying any gift tax. Your child should still tell the lender about the gift and provide a signed gift letter.

Does California have a gift tax?

Not on current gifts. The State Controller's Office says it still collects California gift tax only for gifts made before June 8, 1982.

Can the entire down payment be a gift?

On a conventional loan sold to Fannie Mae for a one-unit primary home, yes. Fannie Mae doesn't require a minimum contribution from the buyer's own funds. Other loan types have their own rules.

This article is general education, not tax, legal or financial advice, and not an offer of credit or a commitment to lend. Examples are hypothetical. Talk with a CPA or tax attorney about your own gifts.

Sources

This article is general education, not a commitment to lend, an offer of credit, or tax, legal or investment advice. All loans are subject to credit approval, income and asset verification, and property appraisal. Programs, rates, terms and limits change without notice; figures are current as of the publish date. Derek Shao, NMLS #242117, CA DRE #01358261. Financial Dynamics, Inc. DBA Emory Financial, Company NMLS #393986. Equal Housing Opportunity.