Charity at Home is Important, too!

​Holiday greetings again, everyone!  Before all your families arrive in a week or so, and your households rival the Griswolds' in "Christmas Vacation" - though, gosh, I hope not! - I want to pass on a few year-end ideas that perhaps you haven't heard before or at least recently.  Of course, if you're already up to speed about these tidbits from years gone by, then that's what the "delete" button is for.  On the other hand, these messages go out to almost 1,000 of you and it's hard to keep track of when each of you came or went from this esteemed group. 

First off, I'm sure you're all aware that we can each give up to $19,000 to each of our family members (or lucky friends) each year, and that a married couple of any gender persuasion can double that amount even if only one of them is actually coming up with the funds to do so - that's up to $38,000 per recipient if my math is still reliable.  This is called the annual gift tax exclusion and it will remain at that level in 2026.

In addition, though, each of us has a lifetime gift and estate tax exemption of $15,000,000 (that's no typo), so a married couple has a total of $30,000,000 to work with for lifetime gifts and/or estate tax values.  If you're worried that this may not be enough to cover your potential tax liability, then congratulations!  For most of us, though, this should allow for as liberal gifting and generosity as we're likely to need.  The way it works is that if our annual exclusion gifts to anyone exceed $19,000 (or $38,000 for marrieds) per recipient, we'll just be using up a portion of our lifetime $15M, and we'll need to file an IRS Form 709 to report those excess gifts.  We don't pay any tax, however; the return is solely to allow the IRS to keep track of how much of our lifetime exemption we've use and how much is left for future gifts or for our estates to claim when that time comes.  

But there are more gifting goodies available, as well.  If we want to pay education (tuition, room & board, travel to and from home and school, etc.) or medical (also dental, optical, therapeutic, etc.) expenses for our favored recipients, we can do so in any amounts without using up any portion of our annual exclusions or lifetime exemptions.  We just need to make sure those payments are made directly to the providers of those services and not to the personal recipients themselves.  No return is even required to report those amounts, though we should certainly keep track of the payments in case we have to prove whether we only paid for legitimate purposes).  Check the IRS website if there's uncertainty about a particular payment (irs.gov).

And finally, if we can't (or aren't inclined to) make a flat-out gift of our funds (because perhaps we'll need them ourselves someday), how about a low-interest loan to a family member, say, for a down payment on a house or to avoid the need for higher-interest education loans that may take years to repay?  After all, the current age for a Gen Zer to be able to buy a house is now about 40 and some people are still paying off student loans they took out 30 years ago.  Just watch Jimmy Stewart's impassioned plea to Old Man Potter in "It's a Wonderful Life" and you'll know what I'm talking about.  Such loans need to be properly documented, of course, but they can be fully or partially forgiven (as gifts in another year) if that becomes an affordable alternative later on.

So, although I often harp on charitable giving this time of year - many of those organizations are like our starving-artist kids after all - charity does begin at home, I've heard.  

That's all for now, I guess, although I'll also reaffirm not to make unwarranted gifts - they're also called scams - to people and organizations you don't know and wouldn't benefit if you did.  Artificial intelligence may be a wonderful concept in many applications, but it's making many scammy solicitations look like the real thing, and if we're not sure about them, then we need to get help before the damage is done and the checkbook is empty.

On that happy note, I'll compensate by wishing you a wonderful time with your families and friends, including a better year for all of us here and around the world who really need it in 2026.