Final answer:
An individual can gift up to $16,000 per year to another person without tax consequences under current laws. The father in this scenario could give a combined total of $32,000 to the couple without triggering any taxes. This can significantly help the couple with their home purchase down payment and closing costs.
Step-by-step explanation:
The question pertains to the amount of money that can be given as a gift without incurring any tax consequences. In the context of helping a young couple buy their first home, a parent may contribute to their down payment and closing costs.
As of the current tax laws, an individual can give a gift of up to $16,000 per year to another person without needing to report the gift to the IRS. If the father were to give a gift to both his son and daughter-in-law, he could give up to $32,000 ($16,000 to each) without any inheritance taxes being implicated. This amount is the annual exclusion for gift taxes and is adjusted periodically for inflation.
While the 20% down payment is often suggested to avoid mortgage insurance, there are options available for potential homeowners to secure lower down payments such as 0-3.5%. However, these come with the additional cost of mortgage insurance, which protects the lender and increases the total mortgage amount paid over time.