A Gift with Benefits!

Close-up of woman holding gift packed in red paperLooking for gift ideas for your family or friends? Consider gifting appreciated stock to benefit both the giver and receiver of the gift.

When you’re considering what type of gift to give your family and friends, several options are available to you including gifts of cash, gift cards, merchandise, and more. In this post, we will focus our attention on a popular gifting strategy: the gift of appreciated shares of stock.

In a nutshell, this gifting strategy consists of transferring appreciated shares of stock to a lucky gift recipient who is in a lower marginal tax bracket than the person giving the gift. The gift recipient would receive the shares of stock, sell them, and pay little or no taxes on the gains (depending on his/her marginal tax bracket). This allows the giver to make the gift without paying taxes at their higher marginal tax bracket (which would be due when they sell the shares of stock) while passing along the benefit of the gift to a friend or family member.

Under our current law, a single taxpayer with taxable income lower than $38,600 ($77,200 for Married Filing Joint taxpayers) would have a 0% Federal capital gains tax rate, whereas someone with a taxable income over $425,800 for a single taxpayer ($479,000 for Married Filing Joint) would have roughly a 23% Federal capital gains tax rate. The differences in tax rates provide a fantastic opportunity for gift planning!

Gift Benefits Flow Chart

In 2018, the Annual Gift Tax Exclusion is $15,000 per person. This means that each person can gift up to $15,000 to whomever they want, and that amount will never be subject to gift taxes. For example:

Alice is 61-year old widow. She wants to gift money to her 2 adult kids and to their spouses, as well. She can gift up to $15,000 to each of the children and $15,000 to each spouse, too, this year without any gift tax consequences.

Gifting appreciated shares of stock is complex and not applicable to all so before proceeding, please discuss your options and the strategy with us, your Financial Planners, and your CPA. We’re here to share our pearls of wisdom—the best gift of all!

Leslie Rea on Linkedin
Leslie Rea
"I strive to provide clients with peace of mind about their financial affairs so they can focus on enjoying a rich and meaningful life.”

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