Key Takeaways
- The IRS raised the annual gift exclusion to $20,000 per recipient for 2027, up from $19,000 for 2026.
- A parent who gives a child $20,000 of shares bought for $5,000 also hands over the $5,000 cost basis, so if the child sells at that price, the sale shows a $15,000 taxable gain.
- At the 15% long-term rate, that gain costs the child $2,250. The same shares inherited at death would take their value that day as their basis and could be sold with no gain.
- Cash, or shares that haven’t gained much, make the cleaner lifetime gift, though a child with a low income may owe nothing on the gain.
If you help your kids out with money each year, the IRS just gave you a little more room. In its 2027 inflation-adjustment release on Thursday, it said the annual gift exclusion rises to $20,000 per person for 2027, up from $19,000 for 2026.
That’s an easy win for anyone writing checks. But if the gift is a stock that’s climbed a long way, your child gets your old cost basis along with it, and possibly a tax bill when they sell.
Your child owes nothing to receive it
On the Nov. 5 episode of his Retirement Planning Education podcast, Andy Panko walked through large year-end gifts and when they call for a gift tax return. Along the way, he noted that “the gift receiver never pays tax on receipt of gifts, regardless of how large a gift is.” He’s right about the day of the gift, and the tax only shows up later, if your child sells.
Let’s say you’re 70, with shares you bought years ago for $5,000 that are worth $20,000 today, and in 2027 you give all of them to your daughter. That’s right at the new exclusion, so it isn’t a taxable gift. As long as it’s all you give her that year, you don’t need to file Form 709 either: the IRS generally requires one when gifts to one person top the annual exclusion.
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Your $5,000 basis goes with the shares
Under IRS Publication 551, when gifted shares are worth at least what you paid on the day you give them, your daughter’s basis is your adjusted basis just before the gift. Here, that’s $5,000. She also counts your holding period as her own, according to IRS Publication 544, so shares you bought years ago are long-term holdings for her too. If she sells them for $20,000, she reports a $15,000 long-term gain: the $20,000 sale price less your $5,000 basis.
Her tax bill comes down to her income
For 2026, the 15% long-term rate applies to a single filer’s taxable income above $49,450 and up to $545,500 (above $98,900 and up to $613,700 for a married couple filing jointly), with the gain counted in that income. If your daughter has a solid income and all $15,000 falls in that band, she owes $2,250 on the sale ($15,000 × 15%).
A daughter just starting out could owe a lot less. Below that band, the 0% rate applies, so if her taxable income stays at or under $49,450 with the $15,000 in it, she owes nothing on the sale. If her income straddles the line, part of the gain is taxed at 0% and the rest at 15%.
Left to her at death, the same shares show no gain
Now say you keep the shares and leave them to your daughter instead. Publication 551 says an heir’s basis is generally the property’s value on the date of the owner’s death. If the shares are still worth $20,000 that day and she sells them for $20,000, she has $0 of gain. The $15,000 they grew while you owned them is never taxed, to you or to her. For a daughter in the 15% band, that saves her the full $2,250.
Give cash and hold the big winners
If it were me, I’d give cash, or shares that haven’t gained much, while I’m alive, and hold the big winners to pass on at death. Cash carries no gain at all, and shares bought near today’s price carry very little. And if you sell the low-basis shares yourself to give your daughter cash, the $15,000 gain lands on your own return, at your own rate.
Shares that have fallen make an awkward gift too. When they’re worth less than you paid on the day you give them, her basis for figuring a loss under Publication 551 is their value that day, so she can’t claim the part of the drop that happened while you owned them.
The calendar helps with cash, too. Panko’s example on the same episode was a single parent giving an adult child $30,000 toward a car: $19,000 in late 2026, then the other $11,000 once the calendar flips to January, so neither year tops the exclusion and no Form 709 is needed. With 2027’s higher exclusion, that January gift could run as high as $20,000.
A gift of stock today can still make sense
None of this makes a lifetime gift of stock a mistake. A daughter saving for a down payment may get far more out of $20,000 of shares now than out of a smaller tax bill decades from now, and she may not sell for years anyway. So before January, it’s worth asking whether your child plans to sell soon, what their income might look like that year, and whether you can afford to hold your biggest winners for the rest of your life. And if the shares keep climbing after the gift, her taxable gain grows with them, since her basis stays at your $5,000.
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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!
