To gift a house to someone, you sign a new deed transferring ownership, record that deed with the county where the property sits, and file IRS Form 709 to report the gift. That much is mechanical. The harder part is deciding whether to give the house during your lifetime at all, because a lifetime gift passes your original cost basis to the recipient and can hand them a six-figure capital gains bill that an inheritance would have erased.
The Deed and How the Transfer Happens
A house changes hands through a deed. Between family members, a quitclaim deed is the common choice: it transfers whatever ownership interest you have without promising the title is clean. A warranty deed promises you actually own the property free of undisclosed claims, which matters more in a sale to a stranger than in a gift to your child.
The deed needs to identify you as the grantor, the recipient as the grantee, and carry the full legal description of the property. You can copy the legal description from your current deed or pull it from the county recorder’s office. You sign in front of a notary public, and some states require witnesses as well. The recipient does not usually need to sign.
Once signed and notarized, the deed goes to the county recorder or clerk in the county where the property sits. Recording fees are generally modest. Until the deed is recorded, the transfer is not part of the public record and does not protect the new owner against competing claims. The transfer itself is complete on recording.
Gift Tax and Form 709
The IRS treats a house given to another person as a taxable gift. For 2026, the annual gift tax exclusion is $19,000 per recipient.1Internal Revenue Service. Revenue Procedure 2025-32 Almost any house exceeds that, so you will need to file IRS Form 709 for the year of the gift.2Internal Revenue Service. About Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return Form 709 is due on April 15 of the year following the gift.
Filing does not mean you owe tax. The amount above the annual exclusion simply reduces your lifetime gift and estate tax exemption, which for 2026 is $15,000,000 per individual.3Internal Revenue Service. Whats New – Estate and Gift Tax Give a house worth $400,000, and the first $19,000 is excluded while the remaining $381,000 counts against that lifetime cap. Unless your combined lifetime gifts and estate exceed $15 million, no gift tax is actually due. Skipping the Form 709 filing is still a mistake the IRS can penalize, so file it whether or not tax will be owed.
Married couples can elect to split a gift, so both spouses are treated as if each gave half. That doubles the annual exclusion to $38,000 for the same recipient. Both spouses must file Form 709 to make the election, even if only one of them owned the property.
You will also need a qualified appraisal from a licensed appraiser reflecting fair market value on the exact date of the transfer. A summary of the appraisal attaches to your Form 709. A real estate agent’s pricing opinion or a rough estimate invites the IRS to challenge your reported value.
Why Gifting May Cost the Recipient More Than Inheriting
This is the decision most families do not think through. When someone receives a house as a gift during your lifetime, their tax basis is whatever you originally paid for it, adjusted for improvements and depreciation.4Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Tax professionals call this carryover basis, because your basis carries over to the recipient.
Say you bought your home in 1990 for $120,000 and it is now worth $550,000. Gift it to your child, and if they later sell for $550,000, they owe capital gains tax on $430,000 of appreciation. At current long-term capital gains rates, that federal bill can exceed $70,000.5Internal Revenue Service. Property Basis Sale of Home
Now compare inheritance. Property inherited at death receives a stepped-up basis equal to its fair market value on the date of death.6Office of the Law Revision Counsel. 26 US Code 1014 – Basis of Property Acquired From a Decedent Leave the same house to your child at $550,000, they sell the next month for $550,000, and they owe zero capital gains tax. The entire $430,000 of appreciation disappears for tax purposes.
For highly appreciated property, leaving the house through a will is often far better for the recipient than gifting it during your lifetime. Families sometimes gift to reduce estate taxes without realizing the capital gains cost dwarfs the estate tax savings, particularly since most estates fall well under the $15 million exemption anyway. Run the numbers both ways before signing a deed.
The Primary Residence Exclusion
If the recipient moves into the gifted house and uses it as their primary residence for at least two of the five years before selling, they can exclude up to $250,000 of capital gains from income, or $500,000 for a married couple filing jointly.7Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence That can offset some or all of the carryover basis problem. It only applies if the recipient actually lives there. Investment property and vacation homes do not qualify.
If the House Still Has a Mortgage
Most mortgages include a due-on-sale clause that lets the lender demand full repayment when ownership changes hands.8Office of the Law Revision Counsel. 12 US Code 1701j-3 – Preemption of Due-on-Sale Prohibitions In theory, deeding the house over could trigger that clause and force immediate payoff of the loan.
Federal law carves out important exceptions. Under the Garn-St. Germain Act, a lender cannot enforce a due-on-sale clause on residential property with fewer than five units when:
- A spouse or child of the borrower becomes an owner
- The property is transferred into a living trust where the borrower remains a beneficiary and continues living there
- The borrower dies and the property passes to a relative, including through joint tenancy
- The transfer goes to a spouse under a divorce or legal separation
Gifting to a spouse or child while the mortgage remains in place rarely creates a problem. Gifting to a sibling, friend, or anyone outside that federal protection is a different situation: the lender has the legal right to call the loan due. Some lenders do not enforce the clause aggressively, but relying on that leaves your credit and the property exposed.
The Medicaid Look-Back Trap
Older homeowners sometimes gift a house hoping to protect it from Medicaid estate recovery. Federal law imposes a 60-month look-back on asset transfers before a Medicaid application.9Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets Give the house away and apply within five years, and the state treats the gift as a disqualifying transfer, imposing a penalty period of ineligibility.
The penalty length equals the value of the transferred asset divided by the average monthly cost of nursing home care in your state. A $300,000 house in a state where nursing home care averages $10,000 per month produces roughly 30 months of ineligibility. During that stretch, you pay for long-term care out of pocket, and there is no cap on how long a penalty period can last. If you are over 60 or have reason to expect needing long-term care in the next several years, talk to an elder law attorney before signing anything.
Costs and Follow-Up After Recording
Several expenses and tasks follow the transfer itself. Some states and localities charge a transfer tax on property conveyances, even between family, which can add a few thousand dollars depending on value and location.
Property tax reassessment is a common surprise. In many jurisdictions, a change of ownership triggers reassessment of the home’s taxable value, and if the home has been owned for decades at a low assessed value, the annual property tax bill can jump sharply. Check with the local assessor before transferring.
Title insurance is another catch. The existing owner’s title insurance policy does not transfer to the recipient. The policy ends when legal title changes hands, so if the new owner wants protection against title defects, liens, or ownership disputes that predate the gift, they will need to buy a new owner’s policy. Inherited property is the exception, since title coverage stays in effect for heirs, but a lifetime gift does not qualify.
After recording, notify the mortgage lender if there is one, the homeowner’s insurance carrier, and the local tax assessor. Insurance policies are tied to the named owner, and failing to update the policy can void coverage on a later claim. The recipient takes over property taxes, insurance, maintenance, and utilities from the transfer date forward.