Gift Appreciated Stock or Cash for a $100,000 Down Payment? How to Calculate the Step-Up Basis Break-Even After September 2026's Mortgage Rate Jump

Mortgage rates jumped today. NerdWallet's "Mortgage Rates Today, Thursday, September 24: Ouch" says the move followed a global bond market sell-off. If you've been planning to help a child or grandchild buy a first home, that headline probably made the number you were going to gift feel too small.

So you're standing at a fork. Do you write a check, or gift appreciated stock and let your kid sell it? Or do you hold the stock so it gets a step-up in basis at death, and find the cash somewhere else?

Most people answer this by feel. This post runs it as a calculation, so you can see which inputs decide the answer and plug in your own.

Everything below is a worked example that I built and labeled. Your numbers will differ based on your specific situation.

The scenario: a $100,000 down payment gift

Here is the setup I'll use throughout:

A parent wants to give a child $100,000 toward a first home.
Option A is cash from a savings account.
Option B is appreciated stock worth $100,000 today with a $40,000 cost basis, so a $60,000 unrealized gain.
Option C is to hold the stock until death, get the step-up, and fund the down payment some other way.
The parent's estate is somewhere near the federal exemption line. For 2026 that is $15 million per person, with a 40% rate above it. If you want the fuller picture, see Estate Tax in 2026: The $13.61 Million Exemption and What It Means for Your Family.

The stock-basis, growth-rate and tax-rate figures are my assumptions. They are not data from any article.

Step 1: What the gift does on the gift tax side

The 2026 annual exclusion is $19,000 per donor, per recipient.

Donor setup	Annual exclusion used	Reportable gift (Form 709)	Lifetime exemption used
Single parent	$19,000	$81,000	$81,000
Married couple, gift splitting	$38,000	$62,000	$62,000

No gift tax is due in either case. The $81,000 is about 0.54% of a single donor's $15 million exemption. You still have to file Form 709, and people skip that step surprisingly often.

If you'd rather stay under the exclusion completely, you can split the gift across two calendar years. That works with a January gift after a December one, but a closing date may not wait for that.

Step 2: The stock question is an income tax question

Gifted stock carries over your basis. If you give $100,000 of stock with a $40,000 basis, your child inherits the $40,000 basis. The gain stays in the stock.

Here is what the child pays on selling it immediately, using a few federal long-term gains rates:

At 0%, the tax is $0. For reference, the 0% bracket topped out at $48,350 of taxable income for single filers in 2025, so a young buyer with modest income may qualify.
At 15%, the tax is $9,000 ($60,000 × 15%).
At 23.8% (15% plus the 3.8% net investment income tax), the tax is $14,280.

There's a trap here. Your child's rate is what matters for a gifted position, not yours. If your child is in the 0% bracket, gifting the stock beats gifting cash by the full amount of tax you would have paid selling it yourself.

If the sale pushes the child's income up, the gain can climb out of the 0% bracket fast. A $60,000 gain stacked on top of wages can put much of it at 15%. Run their actual return before you decide.

There's also a mortgage-timing wrinkle. A stock sale in the same year can raise the child's reported income, and lenders look at income. Check with the loan officer before the sale, not after.

Step 3: What holding for the step-up really costs and saves

Now the long game. Suppose the stock grows at 6% a year (again, my assumption) for 20 years:

$100,000 × 1.06²⁰ = about $320,714

That growth changes the math in two directions.

If you hold to death and heirs get the step-up:

Basis resets to about $320,714.
Income tax on the built-in gain is $0.
The whole $320,714 is in your estate.

If you gift the stock now:

The gain stays with the child. The gift basis is $40,000, so the built-in gain at sale is about $280,714 ($320,714 − $40,000).
At 15%, that is $42,107 of income tax. At 23.8% it is $66,808.
The $220,714 of growth after the gift ($320,714 − $100,000) is out of your estate. At 40%, that is $88,286 of estate tax avoided.

Compare the two outcomes:

Estate tax status at death	Gift saves (estate tax)	Gift costs (income tax at 15%)	Net for gifting	Net at 23.8%
Taxable estate (40% bracket)	$88,286	$42,107	+$46,179	+$21,478
Estate under exemption	$0	$42,107	−$42,107	−$66,808

The result flips depending on whether your estate ends up above the exemption. That's the whole calculation in one line.

The break-even formula

Here it is in plain terms:

Break-even probability = (capital gains rate × total gain at sale) ÷ (40% × growth removed from the estate)

With my numbers:

At a 15% rate: $42,107 ÷ $88,286 = about 48%
At a 23.8% rate: $66,808 ÷ $88,286 = about 76%

So if you think there's less than roughly a 48% chance your estate is taxable, holding the stock wins in this example. That assumes the child would pay 15%. If the child would pay 0%, gifting wins at almost any probability.

Three things move the break-even a lot:

The basis. A $10,000 basis makes the gift more expensive. A $90,000 basis makes it nearly free.
The child's rate. A 0% versus 23.8% spread is the single biggest swing in the calculation.
Growth. At higher growth, both sides get bigger, but the estate tax side scales with more of the growth than the income tax side does. Try it at 3% and at 9% to see.

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

For a related version with a different estate size, see Gift Appreciated Stock or Hold for the Step-Up? The 8-Year Break-Even on a $100,000 Gift From an $18M Estate.

Step 4: The cash option and what it quietly costs

Cash is simple, but it isn't free of trade-offs. Say the parent pulls $100,000 out of a savings account. NerdWallet's "Where's Ally? Why Big Names Miss Our Best Savings List" makes a useful point here. Ally has a solid account with no monthly fees, but other banks offer similar features at better rates. Rate differences compound when you're deciding where the cash sits before it moves.

Say the money earns 4% (an assumption, not a quote from the article) and you pay 24% federal tax on the interest. The after-tax yield is:

4% × (1 − 0.24) = 3.04%

After 20 years: $100,000 × 1.0304²⁰ = about $182,050. That's $82,050 of growth.

If your estate is taxable, gifting the cash removes that growth from your estate and saves about $32,820 in estate tax at 40%. You also stop paying income tax on the interest, which is a small bonus.

Cash growth is much lower than stock growth here, so there's less to remove and less at stake. A cash gift never has a step-up problem, because there's no built-in gain. That's why many families give cash and keep the appreciated stock for the step-up. It's the cleanest way to avoid the basis trade-off.

The catch is where the cash comes from. If you sell other stock to raise it, you've recognized that gain yourself. If it comes from savings, you've given up the yield. Every source has a price.

Step 5: Why the rate jump matters for bigger transfers too

The mortgage rate move affects your child's monthly payment. It also connects to the more advanced tools, and that link is easy to miss.

The IRS 7520 rate used for GRATs and charitable trusts is tied to Treasury yields, which move with the same bond market that pushed mortgage rates up today. The 7520 rate is set monthly, so the effect lags. Higher rates raise the GRAT hurdle, meaning the trust's assets have to beat a higher return before anything passes to your heirs free of gift tax.

For a bigger picture, see Mortgage Rates Above 7% in September 2026: What a 0.2-Point Swing Really Costs a $10 Million GRAT vs. IDGT. It walks through how a rate move changes those trusts differently.

At $100,000, a GRAT is overkill. The legal costs would swamp the benefit. But if you have a much larger position and are weighing this same decision at scale, the framework is similar. Look at GRAT vs. IDGT vs. Direct Gift on a $10M Asset.

What the homebuyer videos add

NerdWallet's two video pieces, "WATCH: First-Time Home Buyer Myths, DEBUNKED" and "WATCH: 5 Things First-Time Homebuyers Wish They Knew," feature the Next Door Lending team. The takeaway for a gifting parent is practical: the money side of the purchase isn't only the down payment.

A few things to run before you write a check:

Ask the lender about gift letters. Lenders typically require documentation that a down payment gift is not a loan.
Check the timing. Funds usually need to be seasoned or documented in the child's account.
Ask about stock. A lender may want the shares sold and the cash sitting in the account before closing.

Those details vary by loan program and lender, so ask your child's loan officer directly.

The Bilt Amtrak lesson: a headline ratio isn't the answer

One more comparison, and it's a small one. NerdWallet reports that Bilt is the only points program to offer transfers to Amtrak, at a 2:1 ratio. The article says that still gives members decent value for train tickets.

The lesson applies to your gift. A ratio by itself doesn't tell you whether the deal is good. 2:1 means 1,000 points become 500 Amtrak points. Whether that's worthwhile depends on what you'd otherwise do with the points.

Estate planning has the same shape. A 15% capital gains rate, a $19,000 exclusion and a 40% estate rate are all headline figures. The real answer comes from combining them with your basis, your growth assumption and the chance your estate is taxable.

Side-by-side summary

Factor	Gift cash	Gift appreciated stock	Hold stock for step-up
Gift tax paperwork	Form 709 for $81,000 (single)	Same	None
Income tax created	Depends on where the cash came from	$0 to $14,280 at sale, by child's bracket	$0
Estate tax removed (taxable estate)	About $32,820 on 20-year growth	About $88,286 on 20-year growth	$0
Basis outcome	Not applicable	Carryover $40,000	Step-up to about $320,714
Best when	Estate is taxable and you have spare cash	Child is in a low bracket and estate is taxable	Estate is likely under the exemption

Nothing here says one column always wins. If your estate is comfortably under $15 million per person, and especially if you're married and can use portability, the step-up is worth more than the estate tax you'd save. If you're near or over the line, or the child is in the 0% bracket, gifting starts to look better. State estate taxes can change that too, since some states have exemptions far below the federal one. Check your state before assuming the federal figure applies.

For a broader way to decide, GRAT, IDGT, or Portability? A 5-Question Decision Framework for Estates Between $5M and $27M in 2026 walks through the questions in order.

Run it for your own situation

Here are the inputs to gather before you decide:

Cost basis and current value of the stock you'd gift.
Your child's likely taxable income in the year of sale.
Your realistic estimate of whether your estate, plus your spouse's, will exceed the exemption.
Your state's estate or inheritance tax rules.
The growth rate and time horizon you actually expect.
The source of the cash if you don't gift stock.

Change one input at a time. You'll see quickly which one your decision hinges on. For most families it's the child's tax bracket or the estate-taxable probability, not the growth rate.

If you'd like this modeled with your own figures, including the step-up trade-off, gift tax filing impact and rate sensitivity, you can do that at Voritanel. The math should make the decision clear without anyone pushing you toward it.

Today's rate news makes the down payment feel urgent. The tax side of the gift is not urgent. A few hours of calculation before closing costs a lot less than the wrong $42,107.

This post is educational and uses illustrative assumptions. It is not tax or legal advice. Confirm the figures with a qualified professional before you act.

Sources

Bilt Adds Amtrak as a Transfer Partner at a 2:1 Ratio — NerdWallet
WATCH: First-Time Home Buyer Myths, DEBUNKED — NerdWallet
WATCH: 5 Things First-Time Homebuyers Wish They Knew — NerdWallet
Where’s Ally? Why Big Names Miss Our Best Savings List — NerdWallet
Mortgage Rates Today, Thursday, September 24: Ouch — NerdWallet