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Financial expert offers tax hack on gifting money

'Tis the season to give — and reap tax benefits, too. If you want to give a large financial gift this holiday season, a tax expert said to wait until next year to take advantage of a new tax law.

Future Perfect Planning President and CFP Cristina Guglielmetti told Yahoo Finance Live (video above) that people should split a large financial gift to take full advantage of the changes in the gift tax exclusion. That exclusion lets people give up to $16,000 in 2022 without being subject to the gift tax. In 2023, that limit increases to $17,000.

"You may want to give part of that gift this year and part of that gift in January in a few weeks and take advantage of the $17,000. That limit increases to $17,000 next year. So that may be something that would work for people who are giving larger gifts," Guglilelmetti said.

( Photo Credit: Getty Creative)
( Photo Credit: Getty Creative)

She also encouraged people to gift charities appreciated stock that had gains from the pre-pandemic bull market years for extra tax benefits.

"You can give appreciated stock, instead of cash. People who are sitting on large appreciated stock gains in mutual funds and stocks in ETFs, you can donate those shares. And that can actually be quite tax efficient. It's even better sometimes than giving cash. And then you can just buy back the same investment if you still want to own it," Guglielmetti said.

Guglielmetti also noted that while people may want to gift stock to children or grandchildren, that may not be the best idea if they want to reduce tax gains and increase the cost basis of an asset.

( Photo Credit: Getty Creative)
( Photo Credit: Getty Creative)

"If you want to gift a portfolio to an individual, it's actually not usually a good idea to do that, to just give them the investments, because the cost basis goes with that gift. I've seen this in situations with lots of clients where maybe they were given shares of stock that their parents or their grandparents bought even decades ago and paid almost nothing for it. But now, all of those embedded gains are still there," Guglielmetti said.

Guglielmetti said that giving money directly to a person to buy stock themselves would be a better way to give a monetary gift.

"If it's a situation where you want to give an investment to a person, it may be better to just give them the cash and have them just buy it directly, " Guglielmetti said.

Ella Vincent is the personal finance reporter for Yahoo Money. Follow her on Twitter @bookgirlchicago.

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