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Tax Efficient Ways To Give To Children & Charities – Finger Financial Five #160

“Giving is not just about making a donation. It is about making a difference.” – Kathy Calvin

When giving to charities or children, be careful about what you give. 

Why? Because it can affect your taxes or your children’s taxes, you would like to be efficient. 

First, let’s address the kids… 

An Example: In 2024, you can give $18,000 per person as a tax gift. This means a husband and wife can give their son and daughter-in-law $72,000 ($18,000x 4).

I have seen parents give low-cost, basic stock. This is probably not the best. Why? Because when the children sell that stock, they must pay the capital gain. A better option would be to give them higher-cost basis stock so they pay less gain and leave low-cost basis stock for inheritance. The reason is that inherited stock should get a step up in cost on the day of death. Then, it could be sold for no capital gain.  

The same issue applies to putting your son or daughter as joint owners of your house.  They will have your cost basis, which may not be the best. 

What is best to give to charities? If you are under 70.5 years old, giving low-cost basis stock is usually best. The charity can sell that stock and pay no capital gain. You get credit for providing the total dollar amount of the donation. However, you must give enough money in a calendar year to make itemizing taxes applicable. Of course, talk to your tax preparer to make sure you choose what is suitable for you. 

You can also consider donor-advised funds. This could be useful in spreading your donation over several years. Read more about this here

If a person is over 70.5 years of age, they can give money directly from their pretax IRA to the charity. No tax! And if they are at an age where you have to take RMDs from their IRA, they can donate up to $100,000.  This is called a QCD or Qualified Charitable Distribution. You can read about this on CNBC.com, where I was quoted. 

Let me know if you have any questions. Please email me at [email protected] or call 843-970-1049.

On the lighter side, Elliott was pictured on USC’s Instagram page. Of course, he does not tell us about it. Another parent did. See picture below.

I hope all is well with you and your family,

Jeremy

Finger Financial Five – 5 points in 5 minutes or less – is intended to provide you with a weekly shot of useful financial information.  My intention is to share principles so that you will have more clarity, more peace, and make better financial decisions. 

Investment advice is offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and Riverbend Wealth Management are separate entities. This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates
do not provide tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

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