The end of the year often brings a natural sense of reflection. We look at what we have accomplished, the challenges we faced, and the people and causes that carried us through the year. It is also a season where many of us think about giving, whether that is gifting to loved ones or supporting a charity that is close to our hearts.
Growing up, my grandmother had a habit of giving each grandchild a small envelope every December. It never mattered what amount was inside. What mattered was that she used those gifts to teach us about generosity and responsible money habits. She would say, Save a little and give a little. Spend the rest on something that brings you joy. Those simple lessons stayed with me and they shape how I talk with clients today about year end giving. Thoughtful gifting can create meaningful impact for both the giver and the recipient, and when done with planning it can strengthen your financial and estate strategy too.
Understanding the Annual Exclusion
The IRS allows individuals to give up to a set amount each year to as many people as they choose without incurring gift taxes. For 2025, the annual exclusion is 19,000 dollars per recipient. A married couple can gift up to 38,000 dollars per person when using split gifting rules. These gifts do not require filing a gift tax return and they do not reduce your lifetime estate and gift tax exemption. This exclusion is one of the most accessible ways to transfer wealth and support family members while managing future estate taxes.
Gifting Options That Align With Your Goals
Cash is the most common way to give, but it is only one option. Investment gifts, such as appreciated stock, can be powerful when the recipient is in a lower tax bracket. Instead of you paying capital gains tax on a sale, the asset transfers with its cost basis and may be taxed at a much lower rate when sold later.
Education gifts are another meaningful choice. Contributions to 529 college savings plans can help children or grandchildren build their education fund, and some states offer tax benefits for contributions. You can also make direct payments for tuition or medical expenses. When paid directly to the school or provider, these payments do not count toward the annual exclusion, which means you can provide significant support without gift tax implications.
For charitable giving, donor advised funds are a flexible tool. You can contribute cash or appreciated assets, receive an immediate tax deduction if you itemize, and grant money to charities over time.
How Giving Impacts Your Taxes
Thoughtful giving can also help manage taxes at year end. Charitable gifts made by December 31 may be deductible if you itemize. Giving appreciated securities can help you avoid capital gains tax while supporting your favorite nonprofit. Some families also use a strategy called bunching where they make several years of charitable gifts in one calendar year to exceed the standard deduction and increase tax savings.
Estate Planning Benefits
Gifting is not only an act of generosity. It is an estate planning tool. Regular annual exclusion gifts reduce the size of your taxable estate and allow you to pass wealth intentionally during your lifetime. Charitable gifts can also be built into your long term plan by naming a nonprofit as a beneficiary of an IRA, using a donor advised fund, or incorporating charitable provisions in your will or trust. These choices reflect your values and help ensure your legacy lives on.
Year end gifting is an opportunity to support the people and causes you care about while strengthening your financial plan. If you want guidance on how gifting fits into your goals, working with a CFP professional can help you make confident and informed decisions.