Ascending line graph and list of share prices / Adam Gault Getty Images/OJO Images RF


Q: Do I have to pay tax when I give away stock?

A: When you give stocks to someone, you not just making the recipient happy. It's also a potential boon for Uncle Sam.

There are strict tax rules around gifts. After all, the government doesn't want wealthy individuals to escape taxes simply by shifting money to family and friends. And the rules, too, apply to gifts of stock.

If you give a monetary gift of $14,000 or less, and that includes stock, you're off the hook initially with taxes. Everyone gets a annual exclusion, currently set at $14,000 a year, which is the limit you can give before the dreaded gift tax kicks in. The gift tax rate is complicated, but can hit upwards of 40%, so it's something you'll want to avoid.

If you give stock valued at $14,000 or less, you might skip past the gift tax, but that doesn't mean you're off the hook with the taxman. There are still capital gains taxes to contend with. If the person you give the stock to sells the shares, they will need to pay capital gains on the gift, based on your original cost of the shares. That might mean a hefty bill for them.

Copyright 2015

Read the original story: Ask Matt: Do I owe taxes if I give away stock?

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