5 Ways to Give a Monetary Gift

Many of us like to give money as a gift. A monetary gift enables people to spend cash on whatever they choose and can be an excellent option for those saving towards a specific item, experience, or investment.

Ways To Give Money as a Gift

If you want to give money to a friend or family member, there are various options, depending on how much you want to give and how you want to give it. In most cases, you won’t need to worry about paying tax on monetary gifts. Here are some ideas for how to do this:

Cash

It’s very common to give cash gifts for special occasions, like weddings, birthdays, and Christmas. Giving cash might not seem like the most thoughtful option, but the recipient can put your money towards something they really want and enjoy the freedom and flexibility of choosing their own gift.

You don’t need to worry about taxes unless your contribution exceeds $19,000 per year. If you plan to gift more cash than this, you’ll need to notify the IRS about your donation.

If you’re worried that giving cash comes across as impersonal, there are some straightforward ways to make your gift more thoughtful, including designing a personalized card and envelope for it, putting it inside a piggy bank or customized savings jar, or exchanging it for foreign currency if the recipient is planning to use it for a trip overseas.

Gift Cards

Gift cards have become increasingly popular in recent years. When you buy a gift card, you provide funds for the recipient to spend in a specific store or venue. Gift cards give people wider choices and make it easier to shop for people without a wishlist.

As with cash, if you give a friend or relative a gift card, you don’t need to think about tax unless the value exceeds $19,000.

Stocks

Buying stocks is one of the most common types of investment, but you can also give equity as a present. You may want to transfer some of your own shares; alternatively, you may be thinking about buying more stocks to give as a gift. With this option, the taxation rules are more complex, and it’s beneficial to speak to a financial adviser.

Assets, such as stocks, can be taxable monetary gifts. The tax rules vary according to who owns the stocks and who the recipient is.

If you transfer shares, you and the recipient could be liable to pay taxes, including capital gains tax, on the assets. If you want to give stocks to a minor, you’ll need to create a specialized account, which you would manage until they reach adulthood.

Savings Transfers and Certificates of Deposit

Transferring money to a savings account or giving cash gifts through a Certificate of Deposit is a common way for adults to give money to children and teens.

If you transfer money to a savings account every year, or deposit cash in an account with compounding interest, you can build a fund.

Although this is one of the best options available, the earnings you make through interest on savings and CDs are taxable.

529 Plan

A 529 Plan is an excellent way to gift money to children for later in life. This is a popular option for parents who want to create a fund for college, for example.

This type of plan is not taxed if used for educational expenses, and there is no limit to the number of 529 plans you can set up.

When you put money into a 529 plan, contributions are made once the tax has been deducted.

How to Give Tax-Free Monetary Gifts

As we stated before, the current annual limit for tax-exempt monetary gifts is $19,000 per person, so you won’t have to file a tax return for the present or report it to the IRS.

An individual can give as many cash gifts up to the value of $19,000 as they want without worrying about the recipients paying tax on the contribution.

The $19,000 limit is the maximum value per person, and it applies to cash, gift cards, and checks.

If you are married, you can combine your personal limits to donate up to $38,000 as a tax-free monetary gift, as of 2025 rules. 

To eliminate tax liabilities on substantial cash gifts, you could consider donating money over some time, as the limit is $19,000 per person per year. There is a lifetime limit of $13.99 million set for 2025.

If you plan to give a gift, and the value exceeds the gift tax exclusion of $19,000 per year, you will need to file a gift tax return with the IRS by completing IRS Form 709. The annual gift exclusion limit applies per recipient. This does not necessarily mean you have to pay taxes on your gift, but it ensures that the IRS is aware of the cash contribution.

It’s also beneficial to gift money as a couple if you are married and want to give a large sum of cash.

Donating Money for Educational Purposes

Many people, particularly parents and grandparents, want to help pay for the cost of education for the children in their families. If you plan to donate money to pay college fees, for example, it’s worth exploring alternatives to simply handing $19,000 or more in cash.

Rather than a monetary gift of more than $19,000 per year, which could contribute to additional taxes in the future, it is possible to donate money directly to an educational institution, such as a college, directly. This means you can gift as much as you like, provided you pay the college, rather than the person liable to pay tuition fees.

You can also use this system to fund medical bills. If you want to help somebody out with fees for treatment or rehabilitation after an accident, for example, you can pay the provider or the facility directly instead of paying the individual.

How Much Gift Tax Do You Have to Pay?

Most people will not have to pay gift tax in their lifetime. However, if you exceed your gift tax exclusions, you will need to pay gift tax. The rate varies between 18% and 40%, depending on how far over your limit you are.