Mark Reckman - Season of Giving

SEASON OF GIVINGEach year about this time, we pause to talk about the upcoming Holiday season. This season is about family and friends. It’s also about recognizing others and giving thanks for what we have. And it is a time to think about folks who are less fortunate. That brings us to today’s topic: GIFTING.Broadly, there are two types of Gifts: 1. Gifts to individuals (usually family); and2. Gifts to charity.A. Gifts to Individuals1. Gifts can consist of anything – cash, stocks, bonds, real estate, jewels, cars, etc. Tax law treats all gifts the same way.2. Gifts can be made during your life (intervivos) or at your death (testamentary). Tax law treats both types the same way.3. Lifetime federal gift tax allowance for 2024 is roughly $13.6 million dollars per person ($27.2 million per couple). There is no longer a state gift tax in Ohio (since 2013).4. The annual exclusion amount for 2024 is $18,000 per recipient. Gifts under that amount are not reportable to the IRS and do not reduce your lifetime allowance. Next year, people are predicting that exclusion will go up to $19,000 per person, per year. 5. Gifts are not taxable income to the recipient.6. Gifts and cost basis (“cost basis” is the price you paid to buy the investment):a) gifts made during life: the person receiving the gift assumes the cost basis of the person making the gift.b) gifts made at death: The cost basis of the gifted asset is “stepped up” at the date of death.B. Gifts to Charity. Charitable gifting dropped in 2022 – for only the 4th time in 40 years. It dropped by about 3.5%. Nationwide, gifts to charity were just under $500 billion in 2022 that rebounded to $557 billion in 2023. Gifts to charities pre-approved by the IRS can be deductible on your 1040 up to 60% of your AGI, but, in many cases, 20%, 30%, or 50% limits can apply. Gifts to charities made at your death, are deductible on your estate tax return – without limitation. There are over 1.5 million “approved” charities. Most donations are made to religious charities. Education and human services are a distant second and third place. Fastest growing category is to Foundations. When making a testamentary gift, consider using qualified funds. This avoids both estate tax and income tax on that money. Consider this idea to build charitable giving into your family’s “culture.” When the kids/grandkids get a little older, put some portion of the money used to buy gifts into a “pot.” Everybody contributes. Then, convene a family meeting and make a joint decision to give it to a charity or list of charities. Not only does this “teach” charity to the next generation, it will give much greater meaning to the Holiday Season. It also reinforces family values. And, believe me, the kids in the family learn from this.