How to Give Money to Individuals and Charities

Giving money to individuals or organizations involves various considerations beyond the simple act of transfer. Understanding different financial transfer approaches helps ensure generosity aligns with established guidelines and personal financial planning. This includes recognizing gifting methods, implications for recipients, and administrative aspects.

Gifts to Individuals

Individuals provide financial support to family members or friends. Common methods include direct cash transfers, writing checks, or utilizing electronic payment platforms. Property, such as a vehicle or real estate, can also be gifted directly, transferring ownership from one individual to another.

The IRS establishes an annual gift tax exclusion, allowing an individual to give a certain amount to any number of recipients each year without triggering reporting or tax consequences. For 2025, this annual exclusion amount is $19,000 per recipient. This means a person can give up to $19,000 to multiple individuals, such as children or friends, without immediate tax implications or needing to file a gift tax return.

Married couples can combine their exclusions, allowing them to gift up to $38,000 to each recipient in 2025 without triggering reporting. For instance, a married couple could collectively gift $38,000 to each of their children without using any of their lifetime gift tax exemption or filing IRS Form 709. The individual receiving a gift generally does not owe income tax on the amount received.

If a gift to an individual exceeds the annual exclusion amount in a single calendar year, the donor is responsible for reporting the gift to the IRS. This reporting occurs on IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. Filing Form 709 does not mean gift tax is owed; rather, it informs the IRS that a portion of the donor’s lifetime gift tax exemption has been used.

Contributions to Charitable Organizations

Financial contributions to charitable organizations involve specific procedures for proper recognition and potential tax consideration. A foundational step is verifying the organization’s tax-exempt status using the IRS Tax Exempt Organization Search tool. This resource allows donors to confirm if an organization is a qualified charity under Internal Revenue Code Section 501(c)(3), making contributions potentially tax-deductible.

Cash contributions are common and include payments by check, online transfers, or direct debit arrangements. Non-cash contributions, also known as in-kind donations, involve giving tangible personal property such as clothing, household goods, or vehicles. Publicly traded stock is another common non-cash asset that can be donated.

When donating tangible personal property, the charity provides a written acknowledgment detailing the items received. For cash donations, bank records or credit card statements serve as proof of contribution. Qualified charitable contributions are tax-deductible for individuals who itemize deductions on their federal income tax returns.

Giving Appreciated Assets

Donating appreciated assets to qualified charitable organizations can be a tax-efficient method of giving. Appreciated assets are investments, such as stocks, mutual funds, or real estate, that have increased in value since their purchase. Giving these assets directly to a charity can offer tax advantages compared to selling them first and then donating the cash proceeds.

A benefit of donating long-term appreciated assets is avoiding capital gains tax on the appreciation. If an individual sells appreciated stock or real estate, they would owe capital gains tax on the profit. By donating the asset directly to a charity, the donor avoids this tax liability, and the charity receives the full market value of the asset.

The process for transferring ownership of appreciated assets depends on the type of asset. For publicly traded stocks, the transfer involves instructing a brokerage firm to move the shares to the charity’s account. For real estate, the process is more involved, requiring legal documentation to transfer the deed. Many charities are equipped to accept these types of donations, often working with donor-advised funds or specialized teams to facilitate the transfer and liquidation of more complex assets.

The donor may also claim a charitable deduction for the fair market value of the donated appreciated asset, subject to certain annual limits based on adjusted gross income. This combination of avoiding capital gains tax and receiving a tax deduction can allow donors to make a larger impact with their giving. Hold the appreciated asset for more than one year to qualify for these tax benefits.

Record Keeping and Reporting

Maintaining accurate records is fundamental for compliance with tax regulations when giving money. For gifts made to individuals that exceed the annual exclusion amount, the donor is responsible for filing IRS Form 709. This form is due by April 15 of the year following the gift.

For charitable contributions, specific documentation requirements depend on the donation type and amount. For any cash contribution, donors should retain bank statements, canceled checks, or credit card receipts as proof. For donations of $250 or more, a written acknowledgment from the charity is required, detailing the amount of cash or a description of non-cash property, and stating whether the donor received any goods or services in return.

Non-cash contributions, such as property, have additional requirements. If the claimed deduction for non-cash items exceeds $500, donors must file IRS Form 8283, Noncash Charitable Contributions. For non-cash contributions valued at over $5,000, a qualified appraisal by a qualified appraiser is required, and Section B of Form 8283 must be completed, including the appraiser’s signature.

The appraisal must be obtained no earlier than 60 days before the contribution date and before the due date of the tax return. These records are crucial for substantiating any claimed tax deductions and for demonstrating compliance if the IRS reviews the taxpayer’s return. Without proper documentation, the IRS may disallow deductions or challenge valuations, potentially leading to penalties.