For information on gifting appreciated stock to charity, click here.


Annual Limit

The IRS excludes gifts to a single person totaling up to an annual max specific to each calendar year.  The annual limit is applied per giver and per recipient. For example, a married couple can gift up to 2x the annual limit to a single person. Or a single person can gift up to the annual limit to an unlimited number of people. The annual limit applies to gifts of cash and non-cash items (stock, vehicle, etc.). However, payments of tuition directly to the school or payment of medical expenses directly to the service provider are not considered gifts for tax purposes.


Gift Tax Filing Requirement

Aggregate gifts to a single person in excess of the annual limit are subject to the Gift Tax filing requirements.  The filing of a Gift Tax Return is informational only and used to track the amount of the lifetime exemption that has been used. The giver does not receive a tax deduction for the gifts. Nor does the recipient report the gift as income on their tax return. 


Tax Consequence

As stated, there is no tax deduction available to the giver and no tax due from the recipient.  In the case of a gift of stock, the recipient retains the basis and holding period of the giver.  Therefore, the recipient receives stock with a built-in unrealized gain or loss, which will have tax consequences to the recipient when the stock is sold.


Gifting Opportunity

Interested in teaching your children or grandchildren about investing? Read this article from Schwab regarding a neat way to turn even the smallest of gifts into stock shares of the biggest companies.

For more information on gifting, including the annual exclusion amount, visit the IRS FAQs here.