How to Give Stock as a Gift (And Why Tax Pros Like The Idea)

What’s a gift that’s more thoughtful than a stack of cash, doesn’t require leaving the house and keeps on giving longer than a fruit-of-the-month club membership? Stock.

Gifting stock is easier than you think, and doing so may offer a few perks for you, too.

Yes, you can gift stock. Gifting stock means the recipient will benefit from any increases in the stock’s value. You can gift stock to kids through a custodial account, and you can gift stock to adults with a simple transfer.

Hang around seasoned investors long enough, and you’ll likely hear a familiar refrain: If only I’d started investing sooner. Giving stocks as a gift can help your family and friends put this advice into practice — especially kids, who may benefit most from long-term compounding returns.

And if you’re giving stocks you already own, there could be a tax advantage for you. From a tax perspective, gifting is a smart way to transfer an appreciated stock, says Karl Schwartz, a certified public accountant and regional director at Team Hewins in Boca Raton, Florida.

“Let’s say you’re an adult and you have this stock with a lot of gains built into it. If you were to sell it, you would pay taxes on the gain. Assuming it’s long-term, you might pay 15%,” he says. But instead of selling the stock, you could give it as a gift, transferring the gains to the recipient.

“The person who received the stock now has that appreciated stock. They can hold it if they want, but if they sell it, assuming they’re in a lower tax bracket, they might pay 0% in capital gains taxes,” Schwartz says.

In other words, both the giver and receiver could avoid paying capital gains altogether on stock that’s been appreciating for years. (Learn more about how capital gains taxes work.)

That’s not the only route to giving stocks, though. You can also buy stocks or other securities you don’t already own, then gift them. Here are two reasons you might consider gifting stocks this year.

As long as the charity is set up for it, donating stock instead of cash can be a smart way to do good this holiday season.

For example, if you want to donate $1,000 to a charity but have to dip into your portfolio to raise the cash, you might pay capital gains taxes on that sale, netting you less than $1,000 to donate. But if you gave $1,000 in stock instead, there’s no tax consequence for you because you’re not realizing any of the gains, and the charity won’t pay taxes when it sells the stock since it’s a tax-exempt entity. What’s more, you may be able to claim a fair market value charitable deduction on that donation. Want to pass these savings back to the charity? All the merrier.

If you’re thinking about your legacy, gifting stocks can be a valuable tool, as opposed to liquidating and paying capital gains taxes. As of 2024, the IRS allows you to gift up to $18,000 per year, per person — including stock. Married individuals who file jointly can gift up to $18,000 each in 2024, for a total of $36,000 to any single recipient.

These limits aren’t bound by familial or marital ties. So technically, you could give $18,000 in stock to each of your children, grandchildren, in-laws, friends and neighbors each year. Couples who file jointly may also be able to take advantage of gift splitting by filing Form 709, which allows them to utilize the doubled gift limit even if only one spouse is contributing.^[0]

You can gift stock to kids through a custodial account, while you can gift stock to adults through a simple transfer from your brokerage account.

One of the simplest ways to get kids started in stocks is to set up a custodial brokerage account. You’ll be able to transfer existing shares of stock, mutual funds or other securities from your account to the custodial account, or buy specific securities directly within the custodial account. The child will take control of the account when they hit a certain age — typically 18 or 21, depending on the state.

Be wary of what the IRS calls the “kiddie tax,” though. Once a child’s unearned income hits $2,500, it can become taxable at the parent’s tax rate.^[0]

If you’re considering a custodial account for a child, it’s also worth exploring Roth IRAs for kids. You can’t transfer stocks as a gift like you can with a custodial account, and the child will need to have earned income to get started, but it’s one way to avoid the kiddie tax issue (and the account grows tax-free).

All that’s required to transfer shares to an adult friend or family member is for the receiver to have a brokerage account. There are a few logistical hurdles though — you’ll need their account information and a few more personal details to actually perform the transfer. If they don’t have an account, you could help open and fund one for them as part of the gift.

You can start the process online in your own brokerage account by opting to gift shares or securities you own; if you can’t find that option, contact your brokerage firm directly. If you want to gift a stock you don’t already own, you’ll have to purchase it in your account, then transfer it to the recipient.