What Buying a House for Your Child Costs Your Retirement
Parents in their 50s and 60s are increasingly buying homes for their adult children. The Wall Street Journal recently featured some of them, including a father in Phoenix who bought a $625,000 four-bedroom house for his daughter and put the mortgage in his own name.
The instinct to help is understandable. Housing has squeezed a generation out of the market, and parents with assets are in a position to do something about it. Buying a house for your child has become a reality for many 55-to-68-year-olds.
But it deserves a thorough financial analysis before closing.
This article covers the math on what a large gift costs your retirement, the tax mechanics many people discover only after the transaction, and a framework for structuring the help in a way that serves your child’s future without compromising your own.
Are More Parents Buying Homes for Their Adult Children?
Parental home assistance has shifted from an occasional family favor to a documented, measurable feature of the U.S. housing market. In 2000, 0.6% of first-time homebuyers between 25 and 34 had a co-borrower aged 55 or older. By the first quarter of 2023, that share had reached 2.5%, according to Freddie Mac research.
The National Association of Realtors 2025 Profile of Home Buyers and Sellers found that 22% of first-time buyers used a gift or loan from family or friends for their down payment. Inheritance as a source of down payment money hit an all-time high of 7%, while 17% of all home purchases in 2024 were multigenerational — also an all-time high.
There is structural change behind these numbers.
Why the Housing Market Has Turned Parents Into Co-Buyers
The median age of a first-time buyer is now 40, which is an all-time record. In the 1980s, it was in the late 20s. That difference in years is a difference in wealth. The earlier someone buys, the longer they hold an appreciating asset, the more equity they build, and the stronger their financial position going into middle age.
An entire generation has delayed home-buying by a decade or more. By the time most of them have saved a down payment, they’re competing against cash buyers in a market where all-cash purchases hit a record high of 26% of transactions. First-time buyers now make up just 21% of the market, the lowest share since NAR began tracking in 1981.
Parents with assets can change those odds. That’s what the data reflects.
Parental Home Assistance Has a Measurable, Lasting Effect on a Child’s Wealth
Deciding to buy a home has consequences beyond the transaction itself. A 2022 San Francisco Fed Economic Letter found that children of homeowners who pull cash out of their home’s equity (through a refinance, HELOC, or sale) are more than three times as likely to buy a home themselves.
They also accumulate 39% more housing wealth by age 30 than children of renters, and 13% more than children of homeowners who never accessed their equity.
The data reframes what parents are doing when they help. A home purchased earlier is an appreciating asset held longer. That means more equity and a stronger financial position.
What a $150,000 Gift Costs Your Retirement
The opportunity cost of a large gift is the compounded portfolio growth that’s lost when assets leave your account early rather than staying invested through the retirement years. Most parents focus on the number leaving their account. The retirement cost runs higher.
Consider a $150,000 gift made at 62, withdrawn from a portfolio that would otherwise grow at 6% annually. Over 15 years, that $150,000 becomes roughly $360,000. The gift doesn’t cost $150,000 in retirement terms. It costs the distance between those two figures: the value that money would have held by age 77 had it stayed invested.
The withdrawal timing adds a second layer. If you pull $150,000 from a portfolio during a market downturn to fund a gift, you’re selling assets at depressed prices. Those shares can’t participate in the eventual rebound. That sequence-of-returns risk makes a poorly timed gift more expensive than opportunity cost math alone would suggest.
These figures are illustrations, not projections. But none of this math argues against helping. It means knowing what you’re working with. The size of the number is one measure of how much the help matters.
When Is the Best Time to Help Your Child Buy a Home?
Timing a large gift thoughtfully can reduce its retirement cost. Here are three windows to consider, in order of retirement risk:
Still working, ages 55 to 62.
For many parents, this is when helping first feels possible. It’s also the most expensive moment to write a large check. The final working years are often the highest-earning and highest-saving period of a career. Catch-up contribution rules let workers 50 and older contribute more to 401(k)s and IRAs. For the first time in decades, savings can actually accelerate. A $150,000 gift pulls capital out of that window permanently. The compound effect of what that money would have grown into during this last push before retirement is at its highest here.
Early retirement, ages 62 to 70.
This is the most cash-flow-sensitive window. Social Security may not yet be claimed. Medicare hasn’t started. The portfolio may be funding living expenses. A large outflow here can force claiming Social Security earlier than planned. That permanently reduces the monthly benefit, and it can accelerate withdrawals from accounts that would otherwise compound. A gift that looks affordable on paper can quietly change two or three other planning decisions.
Post-70.
Required minimum distributions are flowing, Social Security is claimed, Medicare is in place. The plan is more settled and the cash-flow picture is more predictable. A gift during this window carries lower retirement risk than the same gift at 60 or 65. It can also make sense as a live wealth transfer strategy. This means passing assets to the next generation while you can see the benefit, rather than holding them for a future estate.
Most parents considering this decision are in the window where the retirement cost is highest. That makes it worth running the numbers before the conversation turns into a commitment.
Four Ways to Help Your Kids Buy a Home, and What Each Costs Your Plan
The method for how you buy a home for your adult child matters as much as the amount. Each structure carries different tax treatment, different cash flow implications, and a different risk profile for your retirement.
| Method | Description | Tax considerations | Retirement risk level |
| Cash gift for down payment | Transfer funds outright; child gets the mortgage in their name | Annual exclusion: $19K/person ($38K/couple). Amounts above that require filing Form 709 and count against the lifetime exemption | Moderate — depends on amount relative to portfolio |
| Family loan | Parent lends at the IRS minimum interest rate; child repays over time | Must charge at least the Applicable Federal Rate to avoid imputed interest rules; payments return cash flow to the parent | Lower — asset preserved, not depleted |
| Cosigning the mortgage | Parent’s credit supports the loan; child makes the payments | No gift tax issue, but the mortgage appears on the parent’s debt-to-income ratio and credit report | Low-moderate — contingent liability |
| Parent buys outright | Home in parent’s name or transferred to child at purchase | Child inherits the original purchase price as their cost basis — capital gains exposure on future sale can be significant | Highest — full asset depletion; can also produce a worse tax outcome than inheritance |
The stepped-up basis point in that final row deserves more attention than it typically gets. When you purchase a home and transfer it to your child now, their tax cost basis is your original purchase price. When they sell, capital gains tax applies to everything above that figure.
If the same home instead passes through your estate, your child receives a stepped-up basis equal to the home’s market value at the date of your death. Appreciation during your lifetime is wiped out for tax purposes, and the capital gains exposure disappears with it.
That arithmetic favors keeping appreciated real estate in the estate in many situations. Structure the help with that in mind.
What Are the Gift Tax Rules for Helping Your Child Buy a Home?
Most parents helping with a home purchase can do so without triggering gift taxes. The thresholds are high, but the filing requirement is consistently misunderstood.
In 2026, each parent can give up to $19,000 per recipient per year with no paperwork required. A couple can give $38,000 to a single child in a calendar year and the IRS doesn’t need to know about it. That annual exclusion resets each January.
Amounts above the exclusion don’t create an immediate tax bill. They count against the lifetime exemption, which is now set at $15 million per individual, or $30 million per married couple, effective January 1, 2026.
A $150,000 down payment gift from a couple uses $112,000 of their combined lifetime exemption after applying the annual exclusion. Against a $30 million baseline, that’s a small fraction for most families. But it still requires filing IRS Form 709, and skipping that filing creates compliance problems that compound over time.
Two details worth resolving before the transaction closes:
- If the mortgage is in a parent’s name and the child makes the monthly payments, the IRS follows the money. The person making the payments is generally the one who can claim the mortgage interest deduction, not the legal owner of the property. If that’s not sorted out before closing, the deduction can become a source of confusion or a dispute.
- If a parent cosigns, the mortgage shows up on their credit report and debt-to-income ratio. No assets are transferred, but the parent’s borrowing capacity shrinks and a contingent liability appears. If the child misses payments, the obligation falls to the cosigner.
Families now have a stable number to plan around. The $15 million exemption is indexed for inflation going forward. For parents who were weighing the tax exposure as part of this decision, the environment is more predictable than it’s been in years.
A tax advisor should be part of any transaction that involves amounts above the annual exclusion.
Before You Write the Check, Run Your Own Plan First
You now have the pieces. The gift carries an opportunity cost that grows with your age and portfolio size. The window you’re in changes how much that cost compounds. The structure of the help determines the tax treatment on both sides of the transaction. A large gift above the annual exclusion requires Form 709.
What you don’t yet have is a picture of whether your specific plan can absorb it.
Before committing to a purchase, you can model your retirement income in the Boldin Planner with and without the gifted amount. Run a portfolio depletion scenario that assumes the gift comes during a down market, see how a cash-flow shortfall might change your Social Security claiming decision, and compare estate value across different transfer structures.
Some parents will run the scenarios and find their plan handles a $150,000 gift without meaningful disruption. Others will find it shifts the picture in ways they hadn’t considered.
Both are useful things to know while the decision is still yours to make. What you’re looking for is the version of yes your plan can support.
Frequently Asked Questions About Buying a House for Your Child
In 2026, each parent can give up to $19,000 per recipient per year with no reporting requirement. A couple can give a single child $38,000 in a calendar year with no paperwork. Amounts above that don’t trigger immediate tax but require filing IRS Form 709 and draw down the lifetime exemption, which is permanently set at $15 million per individual. After applying the annual exclusion, a $150,000 gift from a couple uses $112,000 of their combined exemption.
Helping a child buy a home carries two costs: the amount transferred, and the compounded growth that money would have generated had it stayed invested. At 62, $150,000 left in a portfolio growing at 6% annually becomes roughly $360,000 by 77. The difference between what leaves the account and what it would have grown into is the real retirement cost.
Leaving appreciated real estate in an estate often produces a better tax outcome for the heir than gifting it during the parent’s lifetime. When property passes through an estate, the heir receives a stepped-up cost basis equal to the home’s value at the date of death, which eliminates capital gains tax on appreciation that grew while the parent owned it. Gifting the property now passes along the original purchase price as the heir’s cost basis, which can produce a significant capital gains bill when the child sells.
Cosigning doesn’t require transferring assets, but the mortgage appears on the cosigner’s credit report and debt-to-income ratio, which limits future borrowing capacity. If the child misses payments, the obligation falls to the cosigner. Before committing, model a scenario in your retirement plan that assumes you’d need to cover several months of payments in a stress case, and confirm that your own borrowing flexibility in retirement isn’t something you’ll need.
Family loans must charge at least the Applicable Federal Rate set monthly by the IRS, or the IRS treats the forgone interest as an additional gift counting against the annual exclusion. Rates vary by loan term. The AFR is published in a monthly IRS Revenue Ruling. A tax advisor can confirm the current rate before you structure the loan.
