A valid sentiment that I fully understand.
My thought is - the same amount of sacrificing can occur if the monthly payments are for a mortgage + escrow, instead of a rent, and the same amount of saving might be needed to be ready to resurface the driveway, replace the roof in a few years, replace the water heater when it leaks, put up solar panels - or install new kitchen appliances, bathrooms,… - or contribute to their own new-born’s 529.
Make sure it is on the room is on the first level, @gardenstategal !!
Well…unless you are gifting millions, don’t worry about the “gift tax”. There isn’t any unless you gift more than several million over your lifetime @BelknapPoint kniws the exact amount. We gave more than the allotted annual gift amount, and had to complete a form which was submitted NOT with our taxes, but was sent in. The form was complicated for us because we gave money on many multiple dates throughout the year. Our financial planner completed it for us.
The understatement of the week, in my opinion.
Unless you and your spouse, as a couple, are planning to gift more than $25.84 million, you don’t have to worry about paying gift tax.
The lifetime estate and gift tax exemption in 2022 is $12.06 million. In 2023 it will be $12.92 million. That’s per individual giving the gift for all gifts while living and after death.
Frankly that is not the relevant number :-). It is going to reset down to $12mm or so by 2025, for the couple. Unless you can give $25mm now and have it be grandfathered. Still a high bar.
An understatement about that specific form or all IRS forms? Both are true!
That form did not ask for very much info but the instructions were not at all clear. It was the first year I started filing my own taxes, so the whole process was slow-going.
I think that’s right–it goes down to $6 million per person ($12 million per couple) in 2026, when the current law expires. There have been some proposals to reduce the Gift Tax Lifetime Exclusion further, but nothing has happened so far.
tl;dr you can’t count on the current amount remaining the same forever.
The good news is that the annual exclusion amount for 2023 has risen to $17k.
I thought the same when I saw that $500k being mentioned as an amount for buying a house. Definitely not enough in the Bay Area.
That specific form. I don’t think it’s difficult if you give one gift one time…and it’s from one person. But we gave many times over a year, and wanted to split between my husband and me. We actually needed to do two forms, one for each of us for the amount we gave…and we had to divide the gifts up too.
I finally threw in the towel and our financial planner did it. He said in situations like ours, it was a bit complicated.
In terms of gifting taxes, I was thinking more about how much money I would have to take out of my retirement in excess of my normal income in retirement. Let’s say I take out 200K per year but have to take out more money than usual to “gift” say 200K, that’s going to change my tax status. Some might have a large amount in non taxable forms but if we’re talking about large deposits, there could be tax implications based on this type of “gifting”.
Also someone mentioned gifting stock and taking the write off. Some people (us) have stock which we’ve held for a very long time that has massive appreciation. So no write offs only more income.
For all these reasons, if I was going to gift a deposit, I’d figure it out tax wise.
Yes, but it’s not just the gift tax exclusion one has to consider. There are lots of tax implications depending on how much you are gifting, your income and the income of the person receiving the gift. I’m sure our CPA would tell us others.
That’s great. We saved a fixed amount (though not the amount suggested) in the early years. We used bonuses for various things but not college savings. Much has been in stock so it was saved and put in our investment accounts. When we sold a couple of businesses/got substantial equity in spin offs, we held the assets in various ways.
At some point, we realized we’d be able to pay for college out of income and with a backstop ( in case of job loss/early retirement etc).
But there were some early years when It was really stressful. HCOL area and kids are expensive. We always thought saving monthly was a better idea. It didn’t work out that way. But it did work out.
I’d tell my kids to save as you did. Don’t hope for a windfall. And better to build slowly. That’s the lesson for them.
I am sure all of this is very complicated
We’ll be talking to #1D and her newish husband this weekend about buying a house…well, they’re talking to us. There’s also the settling of the difference between what we offered to go towards their wedding and what was actually spent.
My parents received $$ back in the day to go towards the down payment on their first house. We’ve received $$ through the years from the ILs. The plan is to gift $$ to the daughters. While H and I paid for our home, the monies received and saved over time from the ILs helped with the down payment on our second home.
I guess that we’ve been fortunate in careers and savings and the inheritance and want to help our children in the same way. We talk regularly to our financial advisor, and, even with market downturns, there’s enough to live well for a long, long time. Why not, then, give some away to see them enjoy it while we’re around? The ILs were beneficiaries of $$ from a sibling and felt the same way.
I’m not looking at whether their marriage will last. If this gift will help that partnership succeed, all the better, IMO.
Once it drops that far “down”, my wife and I shall make a conscious effort to spend anything above that low ceiling on splurging for ourselves. 
I don’t think today’s youth are irresponsible if they need help to afford a starter home. Ours are both frugal and responsible, and would love a small humble, even fixer-upper home to call their own. But that home is 5 - 6x their combined salaries! Our first starter home by comparison was only 1.5x our salaries.
I also am riled when I hear “In my day, interest rates were 14% (or more), and we made it work”. That was true for us – but our starter home cost $50k. Starter homes in their area are 10 - 12x that amount.
I honestly do not see how today’s youth can make it work without assistance, without high-paying jobs. Viable cities need ALL levels of employment to thrive.
Agree that houses were far less expensive back then, but so were starting salaries. My first full time job, as a Ph.D, paid an annual salary of …. $28k. And I dutifully paid my $106/mo student loan.
That’s what kj said – the $50k starter home was 1.5 times their combined salary, meaning they were making about $33k. Most of our college-educated kids are making more than that. Let’s say $75k. Tell me where you’ll find a starter home for $112k, someplace where a young person will make that 75k salary.
What do you mean by “with a backstop”?