How to Gift Stock to Children & Loved Ones [Tips from a Tax Pro]
Do you have stocks that you want to gift to a child or loved one? You can do this in many different ways, but you should also have awareness of the tax implications as well. Gifts that exceed $15,000 in appreciated value fall subject to gift taxes and the person receiving the gift may eventually pay taxes on the gift as well.
When it comes to giving stock, both you and the recipient may face capital gains taxes. Because of this, you should factor these into the decision of whether you gift stock or how much you gift at a time.
Can You Gift Stock to Someone?
In short, yes. You don’t need to sell the stock before gifting shares of stock. Gifting stocks directly to someone, however, involves several issues you’ll need to have more knowledge about before making the transfer from your account to the beneficiary’s account.
Can You Gift Someone Shares of Stock Directly?
- Capital Gains Taxes First, you’ll need to contemplate capital gains taxes, or those taxes you pay when you buy and sell stocks for a level of proceeds which differ from your cost basis.
- Gift Tax Rules Second, you’ll need to navigate gift tax rules. As noted above, for most individuals, this won’t pose a problem so long as the annual amount of gifted stock falls below $15,000 per person (or $30,000 per married couple filing jointly).
- Financial Control Third, you should consider financial control. That means ceding control of the gifted stock to the recipient, who, in most cases, can then do most anything they want with the stocks you give.
For a more in-depth discussion of the possible taxes you pay for gifting stock, let’s take a look at the two types of taxes you’ll need to consider before transferring a stock certificate (digitally) from your brokerage firm to kids, grandkids or other loved ones.
Do You Pay Taxes When Giving Stock as a Gift?
Gift taxes are an issue when you make gifts of cash or property that exceed the annual limits. Thankfully, for most people (married couples excluded), gifting digital shares isn’t considered a taxable gift so long as your total yearly giving doesn’t reach certain thresholds ($15,000 per person per year, or $30,000 per married couple per year) and it’s not done in excess of these same thresholds on an ongoing basis without sufficient consideration.
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