Updated October 2026 with the 2026 IRS gift tax figures, re-read on irs.gov on October 31, 2026.
Yes, you can sell a house for less than its value; it’s legal. Sold to a stranger at arm’s length, a low price is just a low price. Sold to family or a friend, the IRS treats the discount as a gift. Our step-by-step guide to selling a house to a family member covers the paperwork and the gift of equity. As of October 2026, a discount up to $19,000 per person needs no filing. Above that you file Form 709, but no gift tax is due until lifetime gifts pass $15,000,000.
Selling to a stranger? Before you cut the price, make sure buyers can see the home: a $99 flat fee MLS listing puts it on the major home search sites and the MLS. Selling to family? Beycome Title can close it in Florida (from $99) and Texas ($299).
Jump to: 🤝 Family sales · 💲 Seller’s tax · 🏠 Buyer’s basis · 📍 Other rules · ❓ FAQ
Key takeaways
- The gift is the market value minus the price. On a $400,000 home sold to your child for $250,000, that’s a $150,000 gift.
- For 2026, the annual exclusion is $19,000 per person, or $38,000 when spouses split gifts, and the lifetime exclusion is $15,000,000, per the IRS. For cash help toward a purchase, see parents gifting a down payment.
- You still owe income tax on any gain over your basis. A main home may qualify for the $250,000 or $500,000 exclusion. If you sell before the two-year mark, a reduced exclusion may apply.
- The buyer usually keeps a low tax basis. An heir would get a stepped-up basis instead, which can matter more than the gift tax.
The tax side of a family sale is where people guess most. This page sticks to what the IRS and the tax rules say, with one example run all the way through.
Is selling a house below market value a gift?
It depends on who buys and why. The IRS says the gift tax applies to a transfer “while receiving nothing, or less than full value, in return,” whether or not you meant it as a gift. Selling for less than full value “may” be a gift, per the IRS gift tax page.
The regulation draws the line. Under Treasury Regulation 25.2512-8, a sale that is “bona fide, at arm’s length, and free from any donative intent” counts as full value, even if the price is low. So:
- Sale to a stranger at a low price, say a quick sale to an investor: not a gift. You just have a smaller gain.
- Sale to your child, sibling or friend at a family price: the discount is a gift from you to them.
- Bargain sale to a charity: part sale, part donation. IRS Publication 526 explains how to figure the deductible part.
How much can you discount without filing?
| 2026 IRS figure | Amount | What it means for a family sale |
|---|---|---|
| Annual exclusion, one giver | $19,000 per recipient | A discount up to this needs no gift tax return |
| Annual exclusion, spouses splitting gifts | $38,000 per recipient | A married couple can discount up to this to one buyer |
| Basic (lifetime) exclusion | $15,000,000 | Gift tax is only paid once lifetime taxable gifts pass this |
| Who pays any gift tax | The giver | The seller, not the buyer, unless they agree otherwise |
Source: IRS, what’s new for estate and gift tax and the IRS gift tax FAQ. A discount above the annual exclusion means filing Form 709, even when no tax is due. Each filing uses up part of your lifetime exclusion.
How do you set the market value?
Everything above starts with fair market value, so prove it. Get a written appraisal from a licensed appraiser dated close to the sale. Keep it with the contract and your Form 709. The IRS gift tax FAQ lists copies of appraisals among the items to include with the return.
For a quick first look, our free home value estimator pulls recent sales nearby. Don’t rely on a tax assessment or a Zestimate alone for a family sale.
What income tax does the seller owe on a below-market sale?
You pay tax on any gain, figured from the price you actually got. The rule is in Treasury Regulation 1.1001-1(e): on a part-sale, part-gift, you have a gain to the extent the amount you receive exceeds your adjusted basis. If the price is below your basis, you can’t claim a loss.
For your main home, the home sale exclusion still applies. IRS Publication 523 lets you exclude up to $250,000 of gain, or $500,000 for married couples filing jointly, if you pass the ownership and use tests. Didn’t live there two of the last five years? Our guide on avoiding capital gains when selling a house covers the partial exclusion.
Selling a rental or second home to a relative is less forgiving. There’s no home sale exclusion, and IRS Publication 544 says a loss on a sale between related persons isn’t deductible. That list includes parents, children, grandchildren, siblings and spouses.
If you sell your own home below market to a stranger, there’s no gift. Any gain is taxed as usual, and a loss on a personal home can’t be deducted, per Publication 523.
What is the buyer’s tax basis?
This is the part families miss. Under Treasury Regulation 1.1015-4, the buyer’s basis in a part-gift is the greater of what they paid or your adjusted basis, plus any gift tax adjustment. For figuring a loss, it can’t be more than the market value at the time.
So the buyer doesn’t get a basis equal to market value. When they sell later, they’ll owe tax on more of the gain, unless they live there long enough to use their own home sale exclusion.
The same family, one example
| Illustrative example | Sale at a family price | Left to the child at death |
|---|---|---|
| Parents’ adjusted basis | $120,000 | $120,000 |
| Market value | $400,000 | $400,000 at death |
| Price paid by the child | $250,000 | $0 |
| Gift to report | $150,000 ($112,000 after the $38,000 split exclusion) | None (estate rules apply) |
| Parents’ gain | $130,000, often covered by the $500,000 exclusion | None |
| Child’s tax basis | $250,000 | $400,000 (stepped up) |
| Child’s taxable gain on a later $450,000 sale | $200,000 before any exclusion | $50,000 before any exclusion |
The numbers ignore selling costs and improvements. The point is the last row. Inherited property gets a basis equal to its value at death, per the IRS, so waiting can save the child far more than the gift tax ever costs. Our guide to selling a deceased parent’s house shows how that step-up works at sale time.
What other rules apply to a below-market sale?
Medicaid look-back. Federal law makes people who give away assets for less than fair market value within 60 months before applying for long-term care Medicaid ineligible for a period (42 U.S.C. 1396p(c)). A family sale at a discount can count. Talk to an elder law attorney before you sign.
The buyer’s mortgage. If the buyer is borrowing, tell the lender early. The contract and appraisal will show the gap. Some loan programs can count that gap as a gift of equity toward the down payment. Fannie Mae, for example, lets a gift of equity from the seller cover all or part of the down payment and closing costs, with a signed gift letter and a settlement statement that shows it (Selling Guide B3-4.3-05). Ask the lender which rules apply.
State taxes. Transfer taxes, property tax reassessment and any state gift or inheritance tax depend on your state. Check before you set the price. Our breakdown of who pays closing costs when selling shows which side usually pays the transfer tax.
Sell smarter
List your home on the MLS from $99
A flat fee instead of a percentage, and $0 to Beycome at closing. You stay in control of your sale.
Sell your home →Buy smarter
Get up to 2% back at closing
On homes listed by other agents, Beycome credits you up to 2% of the price at closing (1% kept, $1,499 minimum; not on FSBO homes or homes listed by Beycome sellers).
Buy a home →A trust or estate as seller. A trustee or executor who sells to a family member at a discount can face a conflict with the other heirs. Our guide to selling a house in a trust covers that duty.
Should you sell below market to sell faster?
Pricing a little under nearby sold homes is a normal way to get a fast sale to a stranger. That’s not a gift, and there’s no extra tax beyond your gain. Before you cut deep, though, make sure buyers can see the home. A listing on the MLS reaches the agents most buyers use. A flat fee MLS listing starts at $99 with Beycome, and our tips for selling quickly in a slow market cover pricing in more depth.
For a family sale, you may not need a listing at all. You do need a clean contract, an appraisal and a closing agent. In Florida and Texas, Beycome Title can close it. More on the steps in our guide to selling a house by owner. If the home came to you from a parent, read how to sell an inherited house first.
Whichever way you sell, list with Beycome from $99, $0 at closing, and keep every decision yours. 22,000+ have sold with us so far, saving over $225 million (Beycome internal data, October 2026).
What we tell parents selling to a child
Helping your child become a homeowner is a generous thing to do. But selling to family doesn’t mean you skip the paperwork.
Get a written appraisal first, so everyone knows the fair market value. Then talk to a tax professional. A discount can mean a gift tax return even when no tax is due, and your child might come out ahead inheriting the home with a stepped-up basis instead. If you go ahead, use a real purchase contract, a title search and a normal closing, just as you would with a stranger.
Our advice: be generous with your kids and careful with the paperwork. The goal is a head start for them, not a tax headache.
Frequently asked questions
Can I sell my house below market value?
Yes. It’s legal. Selling to a stranger at arm’s length is not a gift. Selling to family or a friend at a discount makes the difference a gift for tax purposes.
What are the tax implications of selling a house below market value to family?
The discount is a gift. Above $19,000 per person in 2026 you file Form 709, but tax is only due past the $15,000,000 lifetime exclusion. You still owe income tax on any gain over your basis.
Can you sell a house for less than it’s worth?
Yes. No law sets a minimum price. To a stranger it’s simply a lower price and a smaller gain. To family or a friend, the gap between the market value and the price is a gift, and a gap over $19,000 per person in 2026 means filing Form 709.
Can you sell a house for less than its value to a stranger?
Yes, and it isn’t a gift. Treasury Regulation 25.2512-8 treats a bona fide, arm’s-length sale with no donative intent as full value, even at a low price. You pay tax only on any gain over your basis.
Can my parents sell me their house below market value?
Yes. They report the discount as a gift if it’s over the annual exclusion. Your tax basis will usually be the price you paid, not the market value.
Who pays gift tax when a house is sold below value?
The seller, as the giver, unless the buyer agrees to pay it. In practice most people owe no gift tax because of the lifetime exclusion.
What happens if I sell my house for less than it’s worth?
To a stranger, you just get less money and a smaller taxable gain. A loss on a personal home isn’t deductible. To family, you also make a gift.
Is it better to gift, sell cheap, or leave a house to my children?
It depends on your goals and numbers. Leaving it at death gives a stepped-up basis. Gifting or selling cheap passes on your low basis. A tax pro can run your case.
Do I need an appraisal to sell to a family member?
It’s strongly advised. The appraisal sets the market value, which fixes the gift amount. The IRS asks for appraisals with a gift tax return.
Reviewed by Beycome Brokerage Realty LLC, a licensed real estate brokerage. Licenses: beycome.com/faq/how-to/are-you-a-licensed-broker/.
This is general information, not tax or legal advice. Gift, income, Medicaid and state tax rules depend on your facts; talk to a CPA or tax attorney before a below-market sale. Examples are illustrative and ignore selling costs, improvements and state taxes. IRS figures are for 2026 as published on irs.gov in October 2026.
Prices as of October 2026 and subject to change. “$0 at closing” means no Beycome fee at closing; other closing costs still apply, such as transfer taxes, title charges and the mortgage payoff. Beycome Title closes in Florida, Texas, Michigan, Ohio, Illinois and Indiana. Brokerage services are provided through affiliated licensed brokerages in 18 states and DC.
Sources
- IRS, gift tax, read October 31, 2026.
- IRS, what’s new for estate and gift tax (2026 exclusions), read October 31, 2026.
- IRS, frequently asked questions on gift taxes.
- 26 CFR 25.2512-8, transfers for insufficient consideration.
- 26 CFR 1.1001-1(e), transfers in part a sale and in part a gift.
- 26 CFR 1.1015-4, basis in a part-gift, part-sale.
- IRS Publication 523 (2025), Selling Your Home, read October 31, 2026.
- IRS Publication 544, related persons and nondeductible losses.
- IRS Publication 526, bargain sales to charity.
- IRS, basis of inherited property.
- 42 U.S.C. 1396p(c), Medicaid transfer of assets look-back.
- Fannie Mae Selling Guide B3-4.3-05, gifts of equity.
- Beycome, listing package features, October 2026.
Disclosure & Disclaimer
Beycome provides real estate services through affiliated licensed brokerages and has a commercial interest in the services and business models discussed on this blog. Content reflects Beycome’s perspective and may promote our services; it should not be treated as independent or neutral reporting.
Articles are provided for general informational and educational purposes only, not as financial, tax, legal, or investment advice or a recommendation for your particular situation. Reading this blog does not create a brokerage, advisory, or other professional relationship.
Information, opinions, pricing, service descriptions, and comparisons reflect the sources and information available when an article was published or last updated and may change. Although we aim for accuracy, we do not guarantee that all content is complete, current, or applicable to your circumstances. Laws, market conditions, and service availability vary by location. Examples and estimated savings are illustrative, depend on stated assumptions, and do not guarantee individual results.
Verify relevant information directly and consult qualified professionals before making decisions. Beycome services are subject to applicable agreements, eligibility requirements, and state-specific terms.
