Gift of Equity Calculator
Calculate gift of equity for family property transfers and below-market real estate sales
Property Details
Current fair market value of the property
Actual selling price to family member
Gift of Equity Results
Transaction Type: Standard Sale
No gift of equity
Calculation Formula
Gift of Equity = Market Value - Sales Price
Example: $0 - $0 = $0
Example Calculation
Family Home Transfer
Scenario: Parent selling to adult child
Market Value: $600,000 (recent appraisal)
Sales Price: $550,000 (family discount)
Purpose: Help child with homeownership
Calculation Results
1. Gift of Equity = $600,000 - $550,000 = $50,000
2. Gift Percentage = $50,000 ÷ $600,000 = 8.33%
3. Child receives $50,000 effective down payment
4. Child only needs loan for $550,000 instead of $600,000
5. Total benefit to child: $50,000
2024 Gift Tax Limits
Consult a tax professional for current rates and implications
Common Use Cases
Parent to child home transfer
Grandparent assistance for first home
Sibling property transfers
Estate planning strategies
Down payment assistance
Benefits
Helps family members buy homes
Reduces loan amount needed
Can count as down payment
May improve loan terms
Important Notes
Understanding Gift of Equity
What is Gift of Equity?
Gift of equity occurs when a property is sold for less than its fair market value, typically between family members. The difference between the market value and sales price represents an equity gift to the buyer, which can be used toward the down payment or closing costs.
How It Works
- •Property is appraised at fair market value
- •Family member sells at below-market price
- •Difference counts as gift equity
- •Can be applied to down payment requirements
Calculation Formula
Gift of Equity = Market Value - Sales Price
Simple subtraction to find the equity gift amount
Requirements & Considerations
Family Relationship: Usually limited to close family members
Documentation: Requires gift letter and appraisal
Lender Approval: Must meet lender's gift of equity guidelines
Tax Implications: May trigger gift tax if above exclusion limits
Important: Gift of equity can significantly help family members achieve homeownership by reducing the cash needed for down payment and improving loan terms.