10 Ways to Put Annual Exclusion Gifts to Good Use

The annual gift tax exclusion allows individuals to give a certain dollar amount each year to someone else without triggering gift tax consequences. The annual gift tax exclusion in 2024 is $18,000 per person, meaning you could give up to that amount to as many people as you like, whether they are related to you or not. A married couple can double that figure, to transfer $36,000 to any number of recipients. Most people can transfer much more than the exclusion amount without paying a gift tax; but many prefer not to go above the exclusion because doing so requires additional tax filing.

Often, annual exclusions are used to help a family member get a financial head start, like contributing to a 529 college savings plan, funding a Roth IRA, paying down debt, or contributing to a wedding, first home purchase, or new business. We discussed some gift ideas for adult children here.

Below are some additional ideas if you are considering annual exclusion gifts to share your wealth with loved ones and other deserving beneficiaries during your lifetime.

Create Memorable Experiences

Rather than a physical object or money, use the exclusion gift for an experience, like a vacation, concert, specialty lessons, or family gathering.

Assist with Home Improvements

Assist with a renovation or repair project to make a home safer, more efficient, or more enjoyable. Also consider enhancements to costly home furnishings, like kitchen appliances or a new bed. Planting a tree or other landscape features could be a way to add value and preserve a nice memory.

Encourage Relaxation and Wellness

If you pay someone’s medical expenses directly to the healthcare provider, you do not need to count those against your annual exclusion. But there could be health-related expenses that aren’t medically necessary that are still worthwhile, like fitness classes, spa visits, aromatherapy, or meditation.

Foster Creativity

Help an artist or craftsperson acquire the supplies and tools needed to develop their trade (or enjoy a hobby) or pay for an instructional workshop.

Give Professional Advice

Pay for the services of a consultant, attorney, accountant, or financial advisor for someone entering a new phase in life where professional expertise could add value and peace-of-mind for years to come.

Upgrade Technology

Contribute to a new computer, tablet, phone or peripheral equipment for enjoyment or home office use.

Boost a Career

Cover the cost of a career coach or professional mentor for someone pursuing advancement or career change.

Provide Transportation

Help with the costs of a new car, car repair, or other transportation costs, including adequate insurance coverage for a newly independent driver.

Care for a Pet

Assist with a one-time or recurring bill for pet adoption, supplies, grooming, or veterinary care. Providing pet health insurance is possible, too.

Encourage Recreation

Buy outdoor equipment for an explorer, like a kayak, skis, or camping gear – especially if they can be used to create memorable experiences like those listed in the first idea on this list.

Leveraging annual exclusion gifts is not only a practical way to share wealth but also a meaningful gesture that can strengthen relationships. By taking advantage of this opportunity, individuals can make a lasting impact on loved ones’ lives. Consulting with a tax professional or financial advisor is recommended to ensure compliance with tax regulations and to explore the best strategies for utilizing the annual exclusion in unique or unexpected ways.

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