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Gift of Equity Calculator

Calculate gift of equity for real estate transactions.

Gift of Equity Calculator

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Gift of Equity Analysis

Gift of Equity

Buyer's Down Payment

Seller Net Proceeds

Gift Percentage

Transaction Breakdown

Market Value:
Sale Price:
Gift of Equity:
Outstanding Mortgage:
Closing Costs:
Seller Net Proceeds:

Tax Considerations

Gift Tax Implications

The gift of equity ($) exceeds the 2023 annual gift tax exclusion of $17,000. You may need to file Form 709 and report this gift to the IRS.

No Gift Tax Filing Required

The gift of equity is within the 2023 annual gift tax exclusion limit of $17,000, so no gift tax filing is required.

Additional Considerations

  • The buyer may be able to use the gift of equity as part of their down payment
  • Lenders typically require a gift letter documenting the gift of equity
  • The property must be appraised to verify the market value
  • Both parties should consult with tax professionals

Understanding Gift of Equity

What is Gift of Equity?

A gift of equity occurs when a seller sells their property to a family member or close friend for less than the fair market value. The difference between the market value and the sale price represents the gift of equity.

How It Works

  • Property is appraised to determine fair market value
  • Seller agrees to sell for less than market value
  • The difference becomes the gift of equity
  • Buyer can often use this as part of their down payment

Benefits

  • Helps buyers who may not have enough cash for down payment
  • Can eliminate need for PMI if gift creates 20%+ equity
  • Keeps property within family
  • May provide tax benefits for sellers in some situations

Requirements

  • Professional appraisal required to establish market value
  • Gift letter required by lender
  • Usually limited to family members or close relationships
  • Property must be buyer's primary residence (for most loan programs)

Calculation Formula

Gift of Equity = Market Value - Sale Price
Seller Net Proceeds = Sale Price - Outstanding Mortgage - Closing Costs
Buyer's Effective Down Payment = Cash Down Payment + Gift of Equity

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