The idea of selling a house for $1 might sound strange at first glance. But for certain situations, especially when the transfer is between family members, selling a house for $1 can be both legal and practical. That said, it’s not without its potential pitfalls.
So yes, you can sell a house for $1, but it’s essential to understand the legal requirements, tax implications, and possible unintended consequences. So whether you are considering selling your home in Portland, OR, to your children for $1 or possibly transferring ownership of your vacation house in Los Angeles, CA, to your sister, keep reading to dive into the legal framework, tax rules, and important considerations for a $1 property transfer.
The legal framework for a $1 home sale
In the United States, property owners are generally free to sell their real estate for any price they choose, as long as the sale meets state and local requirements. This means that while you can sell a house for a dollar, you must still follow standard procedures: Drafting a purchase agreement, signing a deed, and recording the transaction with your county’s recorder or registry of deeds. Even nominal transactions require the same legal documentation as a full-price sale.
Some local jurisdictions might flag the transaction for additional scrutiny if the sale price is far below fair market value. That doesn’t make it illegal, but it may require extra paperwork or an affidavit stating the nature of the transfer.
Tax implications of a $1 sale
This is where things get tricky. For tax purposes, the IRS doesn’t just look at the sale price; it considers the fair market value (FMV) of the property. If you sell a $300,000 home for $1, the IRS will treat the $299,999 difference as a gift.
The U.S. tax code allows for an annual gift tax exclusion of $19,000 per recipient in 2025. Anything above that amount counts toward your lifetime gift and estate tax exemption. The IRS has strict tax rules on property sales, as such becoming familiar with them when considering selling a property is a best practice:
Understanding the lifetime gift tax exemption
The lifetime gift tax exemption is one of the most important concepts to understand if you’re considering a $1 property transfer. This exemption sets the total amount you can give away over your lifetime without owing federal gift tax. For 2025, that amount is $13.99 million per person, and it typically adjusts annually for inflation.
Whenever you sell a home for far below its fair market value, the IRS views the difference as a gift. If that “gift” exceeds the annual exclusion limit, the excess reduces your lifetime exemption. A $1 home sale may feel symbolic, but from the IRS’s perspective, it’s a gift that chips away at your lifetime allowance.
The role of a gift letter in property transfers
A gift letter is another tool that comes into play when transferring property for less than fair market value. The main things to know about a gift letter are that:
- They are a written statement clarifying that a transfer is a true gift, not a loan.
- Gift letters are often required by mortgage lenders when property is transferred between family members.
- They’re not always necessary for a $1 sale, but they can help create a clear record for the IRS and future disputes.
- Gift letters provide transparency and protect both parties by establishing intent in writing.
Gift letters create a clear paper trail, establish intent, and help if the IRS or a lender ever questions the nature of the transaction. Essentially, the letter confirms that the difference between the symbolic $1 sale price and the property’s fair market value was meant as a gift, protecting both parties from misunderstandings.
How capital gains tax affects a $1 sale
The capital gains tax is another critical consideration in a one-dollar property transfer. Unlike with inheritance, a $1 sale passes along the seller’s original cost basis. This cost basis is the amount originally paid for the property, adjusted for improvements or depreciation. For example, if parents bought a home decades ago for $100,000 and sold it to their child for $1, the child’s cost basis would still be $100,000.
If the child later sells the property for $300,000, the $200,000 profit is subject to capital gains tax. This rule can create unexpected tax burdens for buyers who later sell the property. Understanding cost basis is key to deciding whether it’s smarter to inherit a home or purchase it for $1, since the choice can have a significant impact on future taxes.
Determining fair market value
Before attempting a $1 property transfer, you’ll want to know exactly what your home is worth. Fair market value is typically established through:
- Comparable sales in the neighborhood
- Professional appraisals from licensed appraisers
- Market conditions at the time of the transfer
Even if you aren’t selling for profit, an accurate FMV is essential for tax reporting, and can protect both parties if the transfer is later questioned by the IRS or other agencies.
Selling your home for below fair market value
A $1 sale represents the most extreme form of selling below fair market value, but even less drastic discounts can raise similar concerns. For instance, selling a $300,000 property to a relative for $150,000 still creates a $150,000 “gift” in the eyes of the IRS.
The reason for the discount, whether it’s to help family or simply expedite a sale, matters less than how the tax code views it. Because of this, discounted sales should always be documented carefully, and both parties should understand that tax implications may apply even if the transaction seems simple or financially generous.
Estate planning and $1 home sales
One of the main reasons people consider selling a home for $1 is estate planning. Parents may want to transfer property to children while they’re still alive, to simplify inheritance or avoid probate. So is it better to inherit a house or buy it for $1?
The answer depends on the situation. Inheriting a home provides a “step-up” in cost basis for capital gains tax purposes, meaning you’re taxed only on appreciation after the date of inheritance. By contrast, buying a house for $1 means your cost basis is the original owner’s purchase price — potentially leading to higher taxes if you sell in the future.
Benefits of selling a house for a dollar
Despite the complications, there are some benefits to selling a home for $1, particularly within families. One of the biggest advantages is simplifying the transfer of property without going through probate court, which can be lengthy and costly. Families may also choose this option to preserve sentimental or legacy properties.
This ensures that property such as a family cabin or long-owned home remains within the family. Finally, selling for $1 can help a relative who cannot secure financing but still needs housing. While the transaction itself is straightforward, families should still prepare for potential transfer tax considerations down the line.
Drawbacks of selling a house for a dollar
The drawbacks of selling a home for $1 often outweigh the perceived simplicity. One major issue is the likelihood of triggering gift tax reporting requirements. This could complicate estate planning and reduce lifetime exemption amounts.
Another disadvantage is that the buyer may face higher capital gains tax when they eventually sell, since they inherit the seller’s original cost basis. On top of that, lenders, tax agencies, and title companies may scrutinize the deal closely, requiring additional paperwork or delaying the process.
Other considerations before selling for $1
While legally possible, selling a home for $1 can raise several red flags. Selling a home at such a price point may raise questions from:
- Mortgage lenders: May block the transfer if there is still an outstanding loan, as they have a financial stake in the property and require repayment before ownership changes.
- Local tax assessors: It’s possible they still levy property transfer taxes which are often based on fair market value, not the symbolic $1 price tag.
- Title insurance companies: Could require additional documentation to verify the transfer was legitimate.
Additionally, if the buyer later sells the property, their capital gains will be calculated based on the original owner’s cost basis — not the $1 purchase price.
FAQ about selling a house for $1
Is it better to gift or sell a house to a child?
Gifting can avoid some complications, but may trigger gift tax reporting. Selling for $1 has similar issues.
Can I sell my house if I have no money?
Yes. Even if you’re in financial hardship, you can sell — but you’ll still need to cover closing costs unless the buyer agrees to pay them.
What is the easiest way to transfer property to a family member?
In some cases, a quitclaim deed is the simplest method for transferring property to a relative. While a sale for $1 still requires proper recording, a quitclaim deed can speed up the process when the parties know and trust each other.
What happens if you sell or rent a $1 home?
If you later sell a home you bought for $1, your profit will be calculated from the original owner’s cost basis, potentially resulting in a large capital gains tax bill. Renting out the property could also have tax implications, including the need to report rental income and the potential loss of certain homeowner tax benefits.
Can I avoid inheritance tax by buying from a parent?
Buying a parent’s home for $1 does not automatically avoid inheritance tax, and in some cases, it can lead to higher overall tax liability. Always review both federal and state inheritance laws before making such a move.