Charitable Giving

‘Tis the Season … for Strategic Giving

December 18, 2024

By Lynn Gifford Bria, Esq.
Principal Wealth Advisor and Senior Fiduciary Officer
Washington Trust Wealth Management

The holiday season is the perfect time to share your wealth with loved ones—and stay off the IRS’ naughty list while doing it. Knowing and understanding annual exclusion gifting will allow you to transfer wealth to family while minimizing your tax burden. 

Gift Taxes: Common Misconceptions

There are some common misconceptions around giving and receiving gifts and the taxes triggered by those gifts. First, a gift recipient does not pay federal tax on gifts (income tax or gift tax) and is not required to report gifts to the IRS (unless it comes from a foreign source).i

The tax system associated with gifts (the Unified Gift and Estate Taxii) is separate from the income tax system. For gifts over the annual exclusion amount, it is the gift giver, not the recipient, responsible for any gift tax, which is typically not applied until the calculation of the estate tax. (Don’t forget that states have their own tax exemption regulations separate from federal tax.)

An important note: the gift tax applies to any gift, not just money, with some exceptions (such as paying someone’s tuition or medical expenses). So gifting a car worth $15,000 counts against your gift tax exclusion the same as gifting $15,000 in cash. 

Learn more about gift taxes and transferring wealth.

Annual Exclusions and Lifetime Exemptions

By staying within the annual exclusion limit, you can avoid filing a gift tax return (IRS Form 709), which reports taxable gifts that you make to others during your lifetime and counts against your lifetime federal gift tax exclusion.

In 2024, you can give up to $18,000 per recipient ($36,000 for a couple gifting jointly) without triggering gift tax or using any of your lifetime gift and estate tax exemption.iii For example, a married couple could give $36,000 to each of their children and grandchildren (or anyone else, for that matter) each year without counting against their lifetime federal exemption. 

That lifetime exemption stands at $13.61 million per person in 2024, so most Americans will never have to pay a gift tax. (If the Tax Cuts and Jobs Act of 2017 is allowed to expire on January 1, 2026, the lifetime exclusion amount will revert to the 2017 level adjusted for inflation, estimated to be close to $6.4 million.)iv

Learn more about your annual and lifetime exemptions.

Timing matters: To qualify as a 2024 gift, the transfer must be completed by December 31. This includes ensuring checks are cashed or transfers are posted.

Wrapping Up Your Charitable Giving

If you’re considering supporting charities this holiday season, consider giving low-basis stock. When you donate appreciated stock, you won’t pay capital gains tax on the appreciation, so the charity receives the full market value of the stock. And if you itemize deductions, you can claim a charitable deduction for the fair market value of the stock.

Due to tax laws, low basis stock is best gifted to charities, not family. Qualified charities can sell your low basis or other capital assets without any tax liability, but your family cannot.

Remember that just like family gifting, charitable gifts must be completed by December 31 to qualify for 2024 tax benefits.


Washington Trust Wealth Management Can Help

Your Washington Trust wealth advisor can help you plan your gifts to ensure your gifting strategy takes full advantage of annual exclusions and aligns with your financial and life goals, helping you make the most of this holiday season.

Connect with a wealth advisor

No matter where you are in life, we can help. Get started with one of our experts today. Contact us at 800-582-1076 or submit an online form.

Contact us

This document is intended as a broad overview of some of the services provided to certain types of Washington Trust Wealth Management clients. This material is presented solely for informational purposes, and nothing herein constitutes investment, legal, accounting, actuarial or tax advice. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. Please consult with a financial counselor, an attorney or tax professional regarding your specific financial, legal or tax situation. No recommendation or advice is being given in this presentation as to whether any investment or fund is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors, or markets identified and described were, or will be, profitable.

Any views or opinions expressed are those of Washington Trust Wealth Management and are subject to change based on product changes, market, and other conditions. All information is current as of the date of this material and is subject to change without notice. This document, and the information contained herein, is not, and does not constitute, a public or retail offer to buy, sell, or hold a security or a public or retail solicitation of an offer to buy, sell, or hold, any fund, units or shares of any fund, security or other instrument, or to participate in any investment strategy, or an offer to render any wealth management services. Past Performance is No Guarantee of Future Results.

It is important to remember that investing entails risk. Stock markets and investments in individual stocks are volatile and can decline significantly in response to issuer, market, economic, political, regulatory, geopolitical, and other conditions. Investments in foreign markets through issuers or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical, or other conditions. Emerging markets can have less market structure, depth, and regulatory oversight and greater political, social, and economic instability than developed markets. Fixed Income investments, including floating rate bonds, involve risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. Interest rate risk is the risk that interest rates will rise, causing bond prices to fall. The value of a portfolio will fluctuate based on market conditions and the value of the underlying securities. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment loss. Investors should contact a tax advisor regarding the suitability of tax-exempt investments in their portfolio.