Financial gifts can bestow benefits for many years to come. Here are options to consider.
Fund an IRA. Give your children or grandchildren an early start on a comfortable retirement. For 2015, you can contribute the lower of $5,500 or the earned income of the child to an IRA.
Fund a 529 education account. Contributions to a Section 529 college savings plan grow tax-free and withdrawals are tax-free when used to pay qualified education expenses of the account beneficiary.
Fund a Coverdell education savings account. You can contribute up to $2,000 annually to a Coverdell. These IRA-like accounts grow tax-free, though the total amount of your gift may be limited, depending on your income.
Fund a custodial account. Want to encourage an interest in saving and investing? Buy shares in a mutual fund and combine the gift with a book on investing. Your child can watch the investment grow over time and enjoy dividend payouts too. Modest amounts of investment income can be tax-free to children, although the kiddie tax may apply at higher levels.
Call us to review the tax issues related to these financial gifts.
Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.