For the next few months, we, as American taxpayers, have a great opportunity to help our adult children to receive gifts without significant INCOME tax consequence.  This may be especially true if a child is presently unemployed or underemployed.
 
For 2009, taxpayers in the 10% and 15% tax brackets for regular taxable income will enjoy a 0% tax rate on long-term capital gains. This means an adult child will not pay federal income tax on long-term capital gains (they realize this year) to the extent his or her taxable income (including long-term capital gains) does not exceed $67,900, if married and filing jointly, $45,500, if head of household, or $33,950, if single.

If your child’s income (after considering all appropriate deductions and personal exemptions) is projected to fall below this amount in 2009, you should consider making a gift of an appreciate asset, such as stock in a publicly traded company, to your child. He or she could then sell that asset and use the proceeds to help with regular living expenses. Don’t forget that long-term capital gains will only result if the period of ownership by you and your children (combined) exceeds one year.

As we noted in past blogs, gifts up to $13,000 can be made this year without the requirement of filing a gift tax return. This is often referred to as the annual exclusion.  If you want to make gifts or larger amounts, then you should consult your tax advisors BEFORE you make these gifts to determine what gift tax consequence may result.