100+ Years of Combined Tax Resolution Experience.
There are a million different things you can gift your kids over the years. You can give them cars, apartments, furniture, pets, or even stocks. Now stocks aren’t the most exciting gift, and kids might not understand the importance of stocks at first. But a good stock could mean good things in the future.
Giving stock as a gift also has tax advantages, depending on how you manage it. An experienced tax attorney can help you with advanced tax planning and work with you to streamline the process of gifting shares.
If you plan on giving or leaving your children some of your stock, there are a few things to keep in mind.
While gifting a stock certificate to your child on a birthday or holiday might take some explanation, they are likely to thank you for the thoughtful present in the long run. Stocks tend to gain value over time, depending on the type of stocks you give your kids. The longer they hold the stock, the more valuable it becomes.
One feature that helps them earn value is the concept of compound interest. Many types of stocks earn dividends or a share of the stock’s profits. You can choose to have those dividends reinvested in the stock to earn dividends. The longer you hold the stock, the more valuable the portion of your share. If you give your child stocks at an early age, they might have a sizable nest egg saved up without even trying by the time they reach adulthood.
Giving your children stocks has a more immediate benefit, too. Gifting shares of a stock helps you avoid paying a hefty capital gains tax. If you own a stock that has had a lot of gains over time and then sell that stock, you’ll most likely have to pay capital gains tax, which is usually 15%.
Should you decide to give your stock to your child, you transfer the appreciated value to them. Your child is most likely in a lower tax bracket than you, so if they end up selling the stock, they might pay $0 in capital gains tax. A tax attorney can help you see how giving stocks away can help lower your tax bill.
You can give up to $16,000 to each of your children per year without paying the gift tax.
You have a few options for giving stocks to your children. A tax attorney can help you decide which one is most appropriate for you based on how you want your children to use or access the stocks.
One option is to set up a custodial account for your child, then transfer the stocks into it. You’ll have control over the account while your child is a minor. Once they turn 18 or 21, depending on your state, they get control.
Another option is to create a trust for your child. The trust is the legal owner of the stocks. It controls when your child receives distributions from the stock or if they can cash out the stock.
There are other reasons to set up a trust for your children beyond gifting stocks. A tax attorney can help you weigh the pros and cons of setting up a trust and help you decide if it’s the right option for you and your child.
If you’re considering giving your child some or all of your shares of a stock, working with a tax attorney ensures you complete the transfer while minimizing the tax burden for you and your children. Contact us today to set up a consultation.
The world of tax laws is a complex maze, and the IRS statute of limitations is your guide. It tells you how long the IRS has to audit your tax returns and collect any money you might owe. Knowing this timeframe is essential. It’s your protection against the IRS coming after you years down the...
If you and the Internal Revenue Service (IRS) disagree on an outcome or decision involving your tax matter, you can legally appeal their decision. IRS tax appeals allow you to state your case to the IRS appeal division for another evaluation. Whether you need to dispute a tax penalty, assessment or other decision from the...
One of the keys to business success is understanding the tax rules and how they apply to or affect your company. In states where marijuana is legal for medical or recreational use, there are usually special taxes that apply to the sale of the drug. If you’re considering opening a dispensary or own one already,...
The landscape of cannabis taxation is as dynamic as the changing tides of its legal status across various jurisdictions. Entrepreneurs and consumers alike must navigate a complex maze of federal and state tax regulations that often clash or overlap, especially as more states join the roster of cannabis-legal states. Businesses entrenched in the burgeoning industry...
As the fiscal year draws to a close, taxpayers might observe a shift in their strategies by assessing the updated landscape of tax brackets for 2023. With the guidance of Polston Tax’s experienced advisors, individuals, and businesses can navigate the system’s complexities, ensuring a path to financial efficiency and potential savings. Tailored tactics can cater...
Sales tax can be a daunting topic for any business owner, especially if your organization sells across state lines. Knowing the ins and outs of sales tax law is essential for staying compliant and avoiding fines, and it can help you set up your business to meet the requirements of different states, including sunny Florida....