A Thoughtful Way to Give This Holiday Season

The holiday season often inspires generosity, making it a perfect time to give meaningful gifts to loved ones. While sharing your wealth can bring joy, it’s essential to be mindful of federal gift tax rules. Properly planning your gifts not only ensures compliance with tax laws but can also serve as a strategic way to manage your estate and reduce future tax burdens for your heirs.

What Is the Gift Tax Exclusion?

The federal gift tax exclusion allows individuals to give a certain amount to others each year without incurring gift tax or affecting their lifetime estate tax exemption. In 2024, the annual exclusion is $18,000 per recipient for individuals or $36,000 for married couples who give jointly.

For example, if you’re a parent, you can gift $18,000 to each of your children, and if you’re married, you and your spouse can give $36,000 together. These gifts are tax-free for both the giver and the recipient, and they don’t need to be reported to the IRS if they fall within the exclusion limits.

Gifts as a Tax Strategy

Annual gifts can be a smart way to pass on a portion of an heir’s inheritance while avoiding potential tax implications later. By reducing the size of your estate through these gifts, you can minimize future estate taxes while providing financial support to your loved ones now.

Charitable Giving and Income Tax Benefits

If you’re considering gifts to qualified charitable organizations, you may also benefit from an income tax deduction. Charitable gifts must be made by December 31 to qualify for deductions in the current tax year. These contributions can reduce your taxable income while supporting causes close to your heart.

Consult Your Financial Advisor

While the gift tax exclusion rules provide valuable opportunities for tax-efficient giving, they can be complex, especially if you’re making larger gifts or have questions about your overall estate plan. A financial advisor can help you navigate the nuances, align your giving with your financial goals, and ensure compliance with tax laws. Contact us to discuss how gifting fits into your estate and tax situation, and we’ll help you decide upon a thoughtful giving strategy.

About the Author: Mark Roberts

In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution. Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies. Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.” Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.

A Thoughtful Way to Give This Holiday Season

A Thoughtful Way to Give This Holiday Season

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About the Author: Mark Roberts