Aging parents with limited income often receive financial help from their more affluent adult children. Instead of giving the parent(s) after-tax cash, a child (taxpayer) who owns long-term appreciated stock should consider gifting the stock to the parent, who would then sell the stock and keep the proceeds. Depending on the parent’s other income, there may be zero tax due on all or part of the gain from selling the stock.
While tax law generally restricts the transfer of assets (gifts) between individuals, an annual exclusion allows up to $19,000 for 2025 ($18,000 for 2024) to be transferred without gift or estate tax implications. This annual exclusion applies to each taxpayer and to each recipient. So, a taxpayer could gift up to $19,000 to each parent per year. Non-cash gifts are valued at fair market value.
Careful planning is required, however, to maximize the amount of the gift while ensuring that the capital gain from selling the stock doesn’t increase the parent’s AGI to the point that other tax benefits are adversely affected (for example, making Social Security benefits taxable) or cause a jump in taxable income so that the zero capital gains tax rate won’t apply.