A gift letter is a letter that explicitly states that money transferred from a relative or friend is a gift and is not expected to be repaid at any time. Gift letters are often used in connection with mortgage loan applications when the applicant needs both the letter and funds in order to qualify for a loan. Gift letters are generally signed by the person providing the funds and the person receiving the funds. Lender requirements vary slightly, but usually require the following.

• The exact dollar amount of the gift;
• The donor's relationship to the loan applicant;
• The donor's name, address, and phone number;
• A statement that repayment is not expected;
• The date when the funds were or will be transferred;
• The address of the property being purchased, if known; and
• The signatures of the donor and recipient

A gift may or may not be taxable. Recipients should check with their tax preparer to determine whether the gift will result in a federal or state income tax.