How Much Can I Give?

One of the great pleasures of helping people with their financial lives is seeing the joy it brings when they can help their family members financially. Helping kids or grandkids with financial challenges or college is a practically universal goal.

Two-thirds of families say they want to leave an inheritance to their loved ones. One quarter of Americans recently reported providing financial support for someone outside their immediate household in the last year, with the typical dollar amount around $1,000.

While concern about running out of money usually supersedes gifting, the desire to help out family is often strong. That’s no doubt why I commonly hear the question, “how much can I give?”

This question can mean a couple different things, depending on one’s financial circumstances. Many people ask this question meaning, “how much can I afford to give while not running out of money?” For those lucky enough to have a sturdy financial plan with excess assets, this question can also mean, “how much can I give without triggering taxes?” I’ll address these two questions separately.

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How Much Can I Afford?

The amount you can afford to give to family is best addressed through a comprehensive financial plan. Financial planners can help structure financial projections when we know all sources of income, expenses, assets, and liabilities.

But to answer this more broadly, in my experience, people can often give more than they think. It is estimated Baby Boomers and the Silent Generation are set to leave upwards of $85 trillion to heirs and charity in the next 20 years. A large share of those assets could probably be gifted to family members, instead of being included in inheritances.

How much you can afford to give depends on your spending, expectations, and comfort with spending down assets during your lifetime. Suffice to say, many people are under-spending during retirement for fear of running out. This is totally reasonable. Nobody wants to run out of money. But the sacrifice is often more than is necessary. The data around expected inheritances points to the potential magnitude of this under-spending in the aggregate.

So, it’s hard for me to answer this question without a more comprehensive analysis of any particular situation. But I can recommend calculating a simple ratio as a first step. If you look at all your expenses minus all your income (not including investment income or IRA withdrawals), you may be left with a shortfall which must be covered by account withdrawals.

Take that shortfall and divide it by your total investment assets. If the resulting percentage is less than 3 or 4 percent, there may be room for giving, depending on your circumstances.

For example, if you have $700,000 saved in various savings, brokerage, and retirement accounts and you’re spending less than $28,000 per year from these accounts, there may be more room to give. This broad brush estimate won’t apply to everyone, but can give most people a sense whether there may be leeway to give, perhaps with a more robust financial plan.

What’s the Most I Can Give Without a Tax Hit?

For those who already have a robust financial plan with minimal concern about running out of money, the question becomes “how much can I give without triggering taxes?”

The most common answer to this question, which is what you may hear from most accountants, is that you can give $19,000 to any individual without triggering a gift tax return. That’s because $19,000 is the threshold for 2025 and 2026 for giving without any reporting to the IRS.

In other words, anyone can give anyone else $19,000 without filing a gift tax return.

Practically, this can mean a lot more potential giving. For example, a married couple could give $38,000 to one person, since each spouse could give $19,000. A married couple giving to a child with a spouse could give $76,000 ($38,000 to each spouse). And that doesn’t include grandchildren.

You can see how this $19,000 threshold can lead to quite sizable gift amounts. Imagine a married couple with two children, each of whom are married with one child. That is six different people who can be given $38,000. That’s a total of $228,000 that could be gifted every year without any tax filing. This is a very effective way to give your inheritance away quickly during your lifetime. This can also be an effective way to get under the $2 million Massachusetts estate tax exemption (a topic for another day).

For the wealthiest people out there, there is an amount even greater than $19,000. If you give more than $19,000 to any individual, you will be required to file the Form 709 Gift Tax return with the IRS. But how much will you owe in taxes? Probably nothing.

Any amounts over $19,000 apply toward your lifetime gift tax exemption. But the federal lifetime gift tax exemption is currently $15 million per individual recipient. Few people are at risk of breaching this threshold.

This means that if you want to make a huge gift to family during your lifetime, you don’t need to strictly adhere to the $19,000 gift tax exemption amount. Although the tax filing may be a minor headache, the actual taxes owed on gifts are likely to be $0 for all but the wealthiest individuals.

Give it Away Now

Gifting to family is one of the most rewarding aspects of a well-constructed financial plan. Doing it well requires knowing both what you can afford and what the rules allow. Whether you're helping a grandchild with college, supporting an adult child through a tough stretch, or systematically reducing your estate, the good news is that most people have more flexibility than they realize, both financially and under the tax code. There's joy in giving with intention and confidence.

This article originally appeared in The Berkshire Eagle.