Stock Gifting

With the stock market at lofty levels, many investors have portfolios with huge gains sitting inside them. This is great, until you have to pay the taxes!

​How Capital Gains Work
If you purchase 1,000 shares of a stock for $25/share, you have a cost basis of $25,000. If that stock appreciates to $65/share and you sell all 1,000 shares, you have capital gains in the amount of $40,000 ($65,000 proceeds minus $25,000 basis).
 
You’ll then pay capital gains tax on this $40,000 income to the IRS and your state taxing authority. This tax could reach 30% for some folks, which is $12,000.
 
However, there are ways to avoid this tax hit!
 
Stock Gifting Strategies

1. Gift the stock to charity - if you regularly give money to your church or other charity, consider instead gifting your stock. You’ll get a deduction for the full value of the stock (assuming you itemize deductions), and you’ll have no capital gains tax for that stock!
2. Gift the stock to your children - this, too, will eliminate any capital gains tax for you. The potential negative is, your children will carry your original basis and eventually have to pay the piper. However, they can use the charity gifting strategy above to also eliminate the tax.
3. Have your children inherit the stock - the benefit here is the “step-up” in cost basis. As opposed to gifting the stock to your children while you’re alive, passing the stock to them upon your passing allows the cost basis to step-up to current market value. So in the example above, their basis would be the $65,000 value of the stock on the date of your passing.

 
There are obviously several considerations when looking at your stock strategy, including whether you need the money for your own purposes, or plan to assist your kids financially.

You'll also want to consider possible gift tax implications.
 
Contact us with questions about your specific situation…we’re happy to help you strategize!!