Holiday Gift Giving?

The holiday season is just around the corner! And what a wonderful time for giving! Whether we are giving our time or resources, the holidays bring out the giver in all of us as we look for ways to help our neighbor or be a support for those in need.  

The most rewarding benefit of charitable giving, of course, is the joy of contributing to a good cause, a strong belief, or a great need. But there is an extra bonus in charitable giving when that gift can also reduce your federal and state income tax, reduce your estate tax, and/or possibly reduce or eliminate capital gains tax. 

For purposes of charitable giving, charities are classified as public or private, and there are deduction limits determined by the type of charity and the type of property. In general, for contributions to charitable organizations you can deduct appreciated capital gains assets up to 30% of AGI (adjusted gross income), and you can deduct cash contributions up to 60% of AGI. Keep in mind, however, that you must itemize to deduct a charitable gift, and only contributions made to qualified charitable organizations qualify for an income tax deduction. In addition, the gift must be made prior to the close of the taxable year for the gift to be deductible in that year. 

If a charitable gift is made in cash, the amount of cash given is the deductible amount of the gift. The rules for gifts of other kinds become a little more complex. Whereas the deductible amount of a short-term capital gain property gift is the cost basis in the property, the deductive amount of a gift of long-term capital gain property is the current fair market value of the property. So, if long-term capital gain property is given to a charity, the taxpayer can receive a deduction of the full fair market value and avoid paying tax on the gain – a double bonus!  

Concerning gifts to family and friends, every person may gift transfer-tax-free per done up to the annual exclusion for the year, which for 2025 is $19,000. This means you can give up to $19,000 to as many related or unrelated people as you would like each year.  

You can also make a gift by making a payment for qualified medical expenses or tuition for someone else. You must pay the qualifying medical care provider or educational organization directly to qualify for the exclusion, but what a great way to give a much-needed gift this season. Contributing to a 529 education savings plan is another great way to give the gift of education! As always, with any tax advice, we recommend you consult your CPA. 

Giving and gifting – so many choices! What a wonderful time to celebrate in a purposeful way as the leaves change and the cold weather moves in!  

Remember that however you decide to give or gift as we quickly approach the holidays, it is best to have a plan. Each person is unique, and your financial plan should be driven by your values and what is meaningful to you and your loved ones. Your tax advisor and financial planner can help assist and guide you to determine the wisest way to achieve your giving goals that will bring joy to you and your family, bring hope to those around you, and be an integral part of your overall financial plan. 

P.S. - In 2026, start keeping receipts for cash donations even if you don't itemize! Single filers may be able to deduct up to $1,000 and married couples up to $2,000.