How you can Participate in Gifting
This is the time of year when we tend to get a few questions about gifting. People want to know how they can give gifts to family, friends, and even charities. There are a few basic rules to gifting and we will cover that here as well as one way that you can gift and take advantage of potential tax savings. Let us start with the basics though, how do we gift and how much can we give without creating any issues?
The Annual Gift Exclusion
The annual gift exclusion this year from individual to individual is $18,000. This can change on an annual basis, so it is important you pay attention to whether there are any changes going forward to this amount. What this means is that any individual can give up to $18,000 without any tax implications. A good example of this is a mother and a father gifting $36,000 to their son or daughter. As the limit is $18,000 per individual, both mom and dad can give a gift of up to $18,000. Remembering the key rule here of $18,000 per individual is the key but always make sure you consult with your wealth management professional as well as your tax professional to make sure you are staying within the limits and not harming your income, investment, or tax plan for the calendar year.
Qualified Charitable Distributions (QCDs)
If you are over the age of 70.5 and have charitable intent, one item you may want to take advantage of is called a QCD. A Qualified Charitable Distribution is a distribution that goes directly from your IRA to a charitable organization which must be an established 501(c)(3). The way that this can be advantageous to an individual or a family is that when you directly use a qualified charitable distribution, you do not have to pay income taxes on the money you use for the charitable donation. Typically, taking money out of your Traditional IRA will result in you having to pay income tax when you do withdrawal it from your account (in its simplest form). This is one way to avoid taxes on your RMD whenever that is to be established. As I stated above, it is important that you work with your wealth management advisor and your tax specialist to make sure everything is done correctly and that you do not throw a wrench in any of your planning.
The Importance of Professional Guidance
In conclusion, there are various ways you can give gifts to individuals and charities, and in this blog, I covered two of the most common ways to gift as it is that time of year when many people take advantage of gifting. While there are other ways and other strategies one can utilize, proper planning and execution are paramount. The most important part is working with your wealth management advisor and your tax professional to make sure everything is done correctly and does not create any turbulence for your financial plan.
This is being provided for informational purposes only. The views expressed are those of Silver State Wealth Management and do not necessarily reflect the views of Mutual Advisors, LLC, or any of its affiliates. Investment advisory services offered through Mutual Advisors, LLC, DBA Silver State Wealth Management, an SEC registered investment adviser. Silver State Wealth Management, nor any of its members, are tax accountants and do not provide tax advice. For tax advice, you should consult your tax professional.