For many parents in New Jersey, helping their adult children buy a first home feels like the ultimate act of love. With home prices and mortgage rates higher than they’ve been in years, many young buyers find themselves priced out of the market. It’s no surprise that family assistance has become a key part of homeownership. According to the National Association of Realtors, about 38% of first-time buyers received a financial gift or loan from relatives in the past year.
But while generosity is admirable, it’s essential to be smart about how you give. The right approach can help your child get settled and build equity without jeopardizing your own retirement or triggering unnecessary taxes.
1. Decide Whether It’s a Gift or a Loan
The first question is whether you’re giving your child the money outright or expecting repayment. A gift is simple and emotionally clean, but it may have tax implications. In 2025, you can give up to $19,000 per person per year ($38,000 per couple) without filing a gift tax return. Larger gifts can be made beyond this, but you’ll need to file IRS Form 709 to track the gift against your lifetime exemption, which is currently $13.99 million per person.
If you prefer a loan, make it official. Put it in writing, set an interest rate at least equal to the IRS’s “Applicable Federal Rate,” and create a payment schedule. A properly documented family loan keeps expectations clear and prevents future misunderstandings.
2. Avoid Draining Your Retirement
Many parents instinctively look to their retirement accounts for liquidity, but that’s rarely wise. Withdrawals from IRAs or 401k’s are taxed as income and may trigger penalties if you’re under 59½. Worse, you’ll lose the future growth that those dollars would have earned.
Instead, consider using a taxable brokerage account or cash reserves. If most of your wealth is tied up in investments, it may be more beneficial to gift appreciated stock rather than cash. With this strategy, your child can sell the stock, and then they would pay capital gains tax at their tax rate. It is possible that their capital gains rate is lower, creating tax savings for the family.
3. Explore Creative Ways to Help
You don’t have to hand over a six-figure check to make a meaningful difference. Here are a few other ways to lend a hand:
Co-sign the mortgage. This can help your child qualify for a better rate or higher amount, but remember: you’re legally responsible if they miss payments.
Provide the down payment. Even a modest 5%–10% gift can reduce private mortgage insurance (PMI) and improve affordability.
Help with closing costs or renovations. These smaller contributions can be just as valuable, without the same tax or liquidity strain.
Buy together. In some cases, parents and children co-purchase a multi-unit property where the child lives in one unit and you, as the parent, rent out the other unit.
4. Keep It Fair — and in Writing
Money can complicate family relationships. If you have more than one child, talk openly about your intentions so others don’t feel slighted later. When larger amounts are involved, document everything. A written agreement can go a long way toward preserving harmony.
5. Think Beyond the Purchase
Helping your child buy a home is about more than money; it’s an opportunity to teach sound financial habits. Encourage them to build an emergency fund, understand the true costs of homeownership (maintenance, insurance, taxes), and teach them to stay within a reasonable debt-to-income ratio.
Generosity can be a wonderful legacy, but the goal is sustainability for generations. With thoughtful planning, you can help your children plant roots and build wealth, while keeping your own financial future secure.
