Yes, your parents can legally sell you their house for below market value, which is often called a "gift of equity". The difference between the sale price and the fair market value (FMV) is considered a gift, which may require your parents to file a gift tax return if it exceeds the annual exclusion amount ($19,000 per person in 2025).
The short answer: Yes, you can absolutely sell a home below market value—and legally gift the difference. It's a legitimate and frequently used estate planning strategy that can support younger generations, avoid probate, and reduce estate tax exposure.
Yes you can sell it to them for any price. However, you'll be subject to capital gains tax based on the market value of the property, and the children will have a base cost of the market value.
Many mortgage lenders require that the sales price for a transaction between family members be the same as if the deal were happening between strangers. Even if your parents want to give you a great deal, lenders may refuse to finance the purchase if the price is significantly below appraised value.
The Bottom Line
To comfortably afford a 400k mortgage, you'll likely need an annual income between $100,000 to $125,000, depending on your specific financial situation and the terms of your mortgage.
For example, if a married couple wants to give $100,000 to their daughter to help with a down payment on her house, assuming the couple has not made any prior taxable gifts in previous years or the current year, $30,000 would be a gift that is completely free of tax ($15,000 from each spouse), and the remaining $70,000 ...
It allowed sellers to claim CGT exemption for the final 36 months of ownership, even if they had moved out. However, this was reduced to 18 months in 2014 and further to 9 months in 2020, which remains the rule today. This general law is in place as it prevents short-term transaction benefits concerning taxation.
Three months of savings, three months of mortgage reserves, and three property comparisons give you confidence and flexibility. When you follow the 3-3-3 rule, you're not just buying land, you're building a plan that could protect your investment, your lifestyle, and your financial health.
Inheriting a home provides a “step-up” in cost basis for capital gains tax purposes, meaning you're taxed only on appreciation after the date of inheritance. By contrast, buying a house for $1 means your cost basis is the original owner's purchase price — potentially leading to higher taxes if you sell in the future.
Q: Can my parents simply give me their house? A: Yes — they can transfer it using a gift deed without any payment in return. However, doing so may trigger federal gift tax filing requirements (and in rare cases, actual gift taxes) if the home's value exceeds annual and lifetime thresholds.
The go-to method for passing your home to your children is to leave it to them in your will. By allowing them to inherit the property, your children will pay fewer capital gain taxes if they choose to sell the house. Capital gains taxes are imposed on the profit resulting from the sale of the home.
The annual gift tax exclusion of $19,000 for 2026 is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax. This limit rose from $18,000 in 2024 to $19,000 in 2025, where it will remain in 2026.
Transferring property via inheritance using a life assurance policy. A Section 72 life insurance plan is a policy to cover the inheritance tax bills of the beneficiaries of your estate. Therefore, it allows those beneficiaries to inherit assets without then having to find the money to pay a significant tax liability.
There are 2 primary methods of transferring wealth, either gifting during lifetime or leaving an inheritance at death. Individuals may transfer up to $15 million (as of 2026) during their lifetime or at death without incurring any federal gift or estate taxes. This is referred to as your lifetime exemption.
“But at the end of the day, what [the parents] are really doing is giving you the property.” According to the IRS, if you transfer money or property to someone without receiving full value in return, it is considered a gift. The value of that gift must be reported using a gift tax return, IRS Form 709.
To afford a $400,000 home, assuming a 20% down payment and a 6.5% interest rate on a 30-year mortgage, you would need a gross monthly income of about $7,786.55. This assumes you have $1,000 in monthly debt.
Property Tax Reassessment: In states like California, transferring property, even for a nominal amount, can trigger a reassessment at the current market value. However, family transfers may be excluded from reassessment if proper documentation is filed.
Many house hunters wonder how far their salary will go when it comes time to buy. A household earning $70,000 — about $10,000 below the median U.S. salary — could comfortably afford to spend about $257,000 on a house, assuming they put 20% down on a 30-year mortgage with a 6.5% rate.
Want to lower the tax bill on the sale of your home? There are ways to reduce what you owe or avoid taxes on the sale of your property. If you own and have lived in your home for two of the last five years, you can exclude up to $250,000 ($500,000 for married people filing jointly) of the gain from taxes.
A common way to defer or reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
If you use your former home to produce income (for example, you rent it out or make it available for rent), you can choose to treat it as your main residence for up to 6 years after you stop living in it. This is sometimes called the '6-year rule'. You can choose when to stop the period covered by your choice.
Generally, from a tax perspective, it is more advantageous to inherit a home rather than receive it as a gift before the owner's death.
If you sell the house for less than fair market value, the difference in price between the full market value and the sale price will be considered a gift. As discussed above, you can use the $19,000 annual gift tax exclusion as well as the $15 million (in 2026) lifetime gift tax exemption on this gift.