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Should You Gift a $100,000 Down Payment With Mortgage Rates Above 7%? Cash vs. Appreciated Stock vs. Holding for Step-Up

Your daughter calls. She's found a $500,000 house, and she's short. NerdWallet's September 23 update, Mortgage Rates Today, Wednesday, September 23: Easing, But Still Above 7%, says rates dropped a little on a glimmer of economic optimism from Iran, but they're still above 7%. She asks if you can help with $100,000 toward the down payment.

You can. The harder question is what you hand her and what it costs you. A $100,000 cash gift, $100,000 of appreciated stock, and $100,000 left in your estate to pass at death can produce very different tax bills. In one scenario below the gap is about $70,000, and it flips depending on whether your estate is over the federal exemption.

This post walks through that head-to-head with real 2026 numbers. All figures are worked examples, and yours will differ.

Why 7%+ Rates Make the Gift Question Bigger

At 7%, every dollar of down payment is a dollar she doesn't borrow at 7%. As a worked example, assume a 30-year fixed rate of 7.1% (an illustrative number, since NerdWallet only says "above 7%"). Each $100,000 of mortgage costs about $672 a month, roughly $242,000 in total payments over 30 years, of which about $142,000 is interest.

So your $100,000 gift removes about $672 a month from her budget for three decades. That's a real benefit, and it's why parents are asking this question.

There's a counterpoint. NerdWallet's I Edit Mortgage Advice for a Living — and Still Rent features a mortgage content editor who rents at 54. She weighs real down payment costs and investing returns against the true price of homeownership. That framing applies here too. Before you write the check, your daughter should be able to say that buying beats renting and investing the difference at these rates. If it doesn't, the gift is a tax question layered on a housing decision that may be wrong. We'll assume she has run that math and wants to buy.

The Three Ways to Fund $100,000

Here are the three routes:

  1. Cash gift from savings or other non-appreciated assets.
  2. Gift of appreciated stock (say $100,000 of value with a $30,000 cost basis).
  3. Hold the stock and let it pass at death, which gets a step-up in basis. Your daughter would then need a different funding source now, like a loan.

The 2026 rules that matter:

  • Annual gift tax exclusion: $19,000 per donor, per recipient. A married couple can give $38,000 to one child without touching their lifetime exemption. If the child is married, her spouse can receive another $38,000.
  • Federal estate and gift tax exemption: $15 million per person in 2026, so $30 million for a married couple using portability correctly.
  • Top estate tax rate: 40% on the excess.
  • Long-term capital gains: 15% or 20%, plus a possible 3.8% net investment income tax. I'll use 23.8% as the high-bracket case.

If you want the exemption background first, see Estate Tax in 2026: The $13.61 Million Exemption and What It Means for Your Family.

Option 1: The $100,000 Cash Gift

A married couple gives $100,000 to a single daughter. The first $38,000 falls under the annual exclusions. The remaining $62,000 uses lifetime exemption, and you file a Form 709 gift tax return. You owe $0 in gift tax. Against a $30 million combined exemption, $62,000 is about 0.2%.

If she's married and both spouses receive gifts, the exclusion covers $76,000 and only $24,000 touches your exemption.

Cash is simple, but the hidden cost is where the cash comes from. If you sell stock to raise it, you trigger the capital gains tax yourself. If it comes from a CD or savings account, you also lose the interest, which is taxable to you anyway. We covered that trade-off in The $19,000 Gift Tax Exclusion vs. a 4.5% CD Ladder.

Option 2: Gift $100,000 of Appreciated Stock

Assume the stock is worth $100,000 with a $30,000 basis. When you gift it, your daughter gets carryover basis of $30,000. She doesn't get a step-up.

Here's what happens if she sells to fund the down payment right away:

  • Gain: $100,000 − $30,000 = $70,000
  • Tax at 15%: $10,500
  • Tax at 23.8%: $16,660

So the down payment shrinks. She needs the whole $100,000 in cash, but about $10,500 to $16,660 goes to tax, unless she's in a low bracket. In some cases a child in the 0% long-term gains bracket makes this cheap, but a first-time buyer on a mortgage-qualifying income often isn't there.

Verdict for near-term funding: gifting appreciated stock to sell immediately is usually worse than gifting cash. It wastes the gain. The exception is when she's in a low bracket and you're in a high one, which shifts the gain to a cheaper tax rate.

Option 3: Hold the Stock for the Step-Up

If you keep the stock until death, your heirs get a stepped-up basis to fair market value, and the $70,000 of built-in gain disappears for income tax purposes. That's powerful. But you have to look at the estate tax side, because a step-up is never free. The asset stays in your estate.

This is the fork in the road:

  • Estate below the exemption: the step-up is a pure win. No estate tax, no capital gains.
  • Estate above the exemption: the asset gets taxed at up to 40% in your estate. The step-up saves gain tax but you pay estate tax on the whole value.

The Head-to-Head: 20 Years of Growth

Let's model the same $100,000 stock (basis $30,000) growing at 7% for 20 years. It reaches about $386,970 (1.07²⁰ ≈ 3.87). We compare two estates.

Gift stock now (carryover basis)Hold for step-up
Value in 20 years≈ $386,970≈ $386,970
Gain if child sells≈ $356,970$0 (stepped up)
Cap gains at 23.8%≈ $84,960$0
Estate tax if estate is over exemption (40%)$0 (growth left estate)≈ $154,790
Estate tax if estate is under exemption$0$0
Total tax, taxable estate≈ $84,960≈ $154,790
Total tax, non-taxable estate≈ $84,960$0

This is the crossover:

  • If your estate will be over the exemption, gifting saves about $69,830 in this example ($154,790 minus $84,960).
  • If your estate will be under the exemption, holding saves about $84,960, because you avoid both taxes.

Same asset, same growth, and the right answer flips based on one variable. That's why "always gift" and "always hold" are both wrong.

The gift also has a cost on the hold side we haven't priced in. Assuming the child never sells would cut her tax, but that isn't the scenario where she's buying a house. This is the same tension in Gift Appreciated Stock or Hold for the Step-Up? The 8-Year Break-Even on a $100,000 Gift From an $18M Estate, where the time horizon moves the break-even.

This is the kind of analysis Voritanel runs for you, so you don't have to build the spreadsheet yourself.

Where Cash Wins, Where Stock Wins

A practical rule from the numbers above:

  • Gift cash for the down payment and keep the low-basis stock for step-up. That works when your estate is below or near the exemption, so the step-up is worth the most. You use only $62,000 of exemption and avoid the $10,500 to $16,660 gain tax.
  • Gift the high-growth asset when your estate is projected well above the exemption. Getting the future growth out of your estate is what saves the 40%. In that case, consider gifting the asset you expect to grow most, not a stale one.
  • Gift high-basis assets first. If you have stock with basis close to value, the carryover basis costs nothing, so gift that instead of the low-basis lot.

What About a GRAT or IDGT?

A GRAT or IDGT is the structured version of "move growth out of the estate." For a $100,000 down payment, they're overkill. Setup and legal costs would eat a large share of the benefit. They start to make sense at much higher amounts, where the growth above the IRS 7520 hurdle rate is worth the paperwork. For a scale comparison, see $100,000 Down Payment Gift vs. a GRAT on an $18M Estate.

The rough intuition: a GRAT only wins when the asset beats the hurdle rate. At an example 7520 rate of 4.8%, a 7% asset beats it by 2.2 points a year. On $100,000 over 2 years, that excess is only a few thousand dollars. Fees matter at that size.

Small Leaks vs. Big Decisions

NerdWallet's other stories this week make a useful contrast. In I Can't Stop Buying Surprise Bags, the "you don't know which product is inside" appeal is exactly what drains wallets a few dollars at a time. And Chase Freedom Flex Ditches Foreign Transaction Fee, Cell Phone Insurance is a reminder that even a card's perks change and are worth rechecking.

Those are small decisions. A $100,000 gift decision is different: the difference between the best and worst option here is $70,000 to $85,000 in the 20-year example. That's more than a lifetime of foreign transaction fees. Spend your attention accordingly.

What About the Politics?

NerdWallet's piece Data Centers Are a Potent, Bipartisan Battleground in the Midterms shows how quickly local cost fights can become national. It doesn't touch estate tax law. But it's a fair reminder that rules, rates and exemption amounts are set by a political process. The exemption is $15 million today, and I wouldn't design a plan that only works if it stays there. Run it under a lower exemption too. If the answer to "gift or hold?" doesn't change, you have a robust plan. If it flips, that tells you how sensitive you are.

The Variables That Decide Your Answer

Here's what changes the result:

  1. Projected estate size vs. the exemption. This is the biggest driver. Include life insurance, retirement accounts and real estate.
  2. State estate tax. Some states tax estates well below $15 million, and their exemptions don't port between spouses. That can favor gifting even when you're under the federal line. See GRAT vs. IDGT vs. Portability on a $7 Million Estate: Why Massachusetts Residents Still Owe About $588K.
  3. Your basis and your daughter's tax bracket. A $30,000 basis and a 23.8% rate produced the numbers above. A 15% rate or a higher basis changes them a lot.
  4. Time horizon. Ten years of growth versus thirty changes the crossover.
  5. Growth rate. At 4%, the estate tax savings from gifting shrink. At 10%, they grow.
  6. Whether she'll sell. If the asset stays in her hands for life, her own step-up at death can neutralize the carryover-basis cost.
  7. Mortgage rate and housing decision. The value of the gift depends on how much interest it avoids and whether buying beats renting for her.

Your numbers will differ based on your specific situation. The example uses a 7% growth rate, a $30,000 basis and a 23.8% gain rate. Change any of those and the crossover moves.

You can model this for your specific situation at Voritanel.

A Short Checklist Before You Write the Check

  • Estimate your estate at death, not today, and compare it to the exemption.
  • List which assets have the lowest basis (candidates to hold) and highest basis (candidates to gift).
  • Check your state's estate tax threshold.
  • Confirm how much of the $19,000 annual exclusion you and your spouse can use per recipient.
  • Plan the Form 709 filing. A gift over the annual exclusion requires a return even when no tax is due.
  • Ask whether she truly wants to buy, given rents and rates.

Bottom Line

With mortgage rates still above 7%, a $100,000 down payment gift is meaningful for the child, and the tax cost is close to zero if you do it with cash. The bigger dollars are in the choice between gifting appreciated stock and holding it for the step-up. In the 20-year example, that choice was worth about $70,000 in one direction or $85,000 in the other, depending entirely on whether your estate ends up above or below the exemption.

Neither choice is always right. If you'd like to see your own crossover point, run your numbers through Voritanel with your estate size, basis, state and time horizon, and let the math tell you which side you're on.

Sources

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