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 at 646-688-2807 to review the tax issues related to these financial gifts.