Ask Terry Questions Gifting and taxes

Gifting and taxes

By Terry Savage on October 26, 2023 | Financial Planning / Retirement

Hello, thank you for taking my question. I told my daughter I would give her $30,000 towards her wedding since she might plan on getting married next year after she finishes her degree this year. I have an account with that amount of money in it in a mutual fund. I also have that in individual stock account. I wanted to know the best way to give her the money and not ruin my senior tax freeze or hit himself hard with taxes. I can cash in that mutual fund, or some stocks to make up the 30k total but I don’t know the best place to take it from and also should I gift it, 1/2 at a time, over this year and next? Should I gift her 30k in stock? I’m 68, retired and collecting SS and a small pension. Thank you!

Terry Says

Well, that is very generous of you. But aren’t you likely to need the money yourself in retirement — for everything from property taxes to Medicare premiums, etc.
I would suggest waiting to make the gift until the wedding is very close. No sense getting carried away right now.
You would want to divide the money up over two years, to avoid any gift tax impact. You are allowed to gift up to $17,000 to any one person in any year. So she can put the rest of the wedding costs on her credit card, and if she does get married, first give her $17,000 and then wait until the next year (2025) to give her more.

Now, the question is where that money is coming from. If it is in an IRA and you take it all out at once, or even $17.000 in one year, it is all added to your ordinary income. Depending on your current tax bracket it could impact all sorts of things — from the senior property tax freeze to your Part B Medicare premiums.

If it is money you have invested in stocks or mutual funds for a long time, and if you have gains, those gains will be taxed at the capital gains rate — currently a maximum of 20%. If you sell some stocks at a loss, that could offset your gains.

I suggest you talk with your tax preparer about the implications BEFORE you do this, and it will all be based on your personal situation. But keep in mind, you will have to reserve some of your withdrawals to pay any taxes that might be owed.

Could I say again, this is overly generous. By the time you need help, need this money, she will likely be in no way
position to support you in your old age!

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