Key Takeaways
- A single 66-year-old with $250,000 of modified AGI who sells $19,000 of long-held shares bought for $4,000 owes $2,820 of federal tax on the $15,000 gain.
- If the parent gives the shares to a 30-year-old child earning $30,000, the child keeps the $4,000 cost, but the gain falls under 2026’s 0% capital gains rate, so the child owes $0 of federal tax on the sale.
- A $19,000 gift fits this year’s annual gift exclusion and needs no gift tax return, and the IRS said on Nov. 5 that the exclusion rises to $20,000 in 2027.
- This only works with money you were going to give away anyway, and a child under 18, or a full-time student under 24, can run into the kiddie tax.
If you’re planning to help a grown child with some money before the year ends, and you own a stock that’s climbed a lot since you bought it, I have some good news. Selling those shares and writing a check could hand the IRS thousands of dollars. Handing over the shares themselves could cost nothing at all.
The IRS said on Nov. 5 that the annual gift exclusion rises to $20,000 for 2027, up from $19,000 for 2026. So a gift you make in the next few weeks still counts against this year’s $19,000.
Selling first costs you $2,820
Let’s take a hypothetical: you’re single and 66, with $250,000 of modified AGI, and you’ve owned a stock for years. Your shares are worth $19,000 today, and you paid $4,000 for them. Your 30-year-old, who files as single and earns a $30,000 salary, could use some help.
Sell the shares, and you have a $15,000 long-term gain. At your income, the IRS taxes it at 15%, a rate that runs up to $545,500 of taxable income for single filers in 2026. You’re also over the $200,000 line where the 3.8% net investment income tax starts for single filers, so that tax applies to the whole gain too. That’s 18.8% of $15,000, or $2,820 in federal tax.
So either your child gets $16,180 instead of $19,000, or the $2,820 comes out of your own pocket. But you can give your child the shares themselves.
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Your child takes over your $4,000 cost
When you give someone shares during your lifetime, they generally keep your cost. IRS Publication 551 says that when property is worth at least what the donor paid on the day of the gift, the recipient’s basis is the donor’s adjusted basis. So your child’s basis is $4,000, and the $15,000 gain you haven’t paid tax on goes with the shares.
Your holding period goes with them too. Under IRS Publication 550, when the recipient’s basis is the donor’s, their holding period starts the day the donor’s did. That means your child’s sale counts as long-term even a week after the gift. What changes is who pays tax on the gain, and at what rate.
Your child’s bill is $0
For 2026, the IRS taxes long-term gains at 0% up to $49,450 of taxable income for a single filer, with the gain counted in that income. Your child’s $30,000 salary, less the $16,100 standard deduction a single filer gets in 2026, leaves $13,900 of taxable income. Add the $15,000 gain, and that’s $28,900, which is $20,550 under the 0% line. So the whole gain is taxed at 0%, and at $45,000 of income your child is nowhere near the net investment income tax either.
| Metric | You sell | Your child sells |
|---|---|---|
| Gain | $15,000 | $15,000 |
| Rate on the gain | 15% + 3.8% | 0% |
| Federal tax on the gain | $2,820 | $0 |
Same shares, same gain, and $2,820 stays in the family.
Keep the gift at $19,000 this year
At $19,000, the gift fits the IRS’s 2026 annual exclusion, which lets you give each person up to $19,000 without it being a taxable gift. Give one person more than that this year, counting every gift to them, and you generally have to file Form 709, a gift tax return. Filing one doesn’t by itself mean you owe gift tax, but you can skip that step.
Andy Panko, host of the Retirement Planning Education podcast, talked about this on his Nov. 5 episode. His example was a single parent who wants to give an adult child $30,000 toward a car. His fix: “Give them only $19,000 now in 2026. Wait until the calendar flips to January 2027.” Shares work the same way. With next year’s higher exclusion, you could give $39,000 of shares in two gifts a few weeks apart without filing a gift tax return.
Don’t try this with a younger child, though. It doesn’t work for a child under 18. It also doesn’t work for a full-time student who’s at least 19 and under 24 at year-end and whose earned income doesn’t cover more than half of their own support. For those children, unearned income over $2,700 can be hit by the kiddie tax, a special tax figured on Form 8615.
Hand over the shares, and let your child sell
If you were going to write that check anyway, I’d give the shares instead and let your child do the selling. Of course, a gift is a gift: once the shares are your child’s, so is the decision about what to do with them, and the money. So give only money you won’t need back.
Your child needs room under that $49,450 line, too: a big raise, or other gains sold the same year, could push part of this gain into the 15% rate. And your child needs to sell this year for 2026’s figures to hold. A sale in January falls under 2027’s brackets, where a single filer’s standard deduction rises to $16,600.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
