Finding the perfect holiday gift for each person on your “nice” list is one of the toughest challenges of the season.
Whether you don’t know your recipient very well or you’re searching for something for the person who has everything, a cash gift can make things easier for you and guarantee your gift will be put to good use.
But how can you give cash gifts without seeming like you put in minimal effort? Here are some options to help personalize your monetary giving and ensure the most thoughtful gift for each person on your list.
1. Gift card
If you know your gift recipient well, find their favorite store or restaurant and buy a gift card to treat them to something you know they’ll love. Even if they’re harder to shop for or you’re not very close, there’s nothing wrong with choosing a Visa or American Express prepaid cash card. Pair it with a heartfelt note to show how much you care.
If you’re still wary of coming across a bit too impersonal, try giving an experience instead. Prepay for a couple of movie dates or a trip to the spa where you can spend time together and enjoy a nice treat.
You may score a bonus for yourself when you buy a gift card for a loved one, especially during the holiday season. Many restaurants and retail stores offer a bonus card for you when you spend a minimum amount on a gift card for someone else.
For example, if you purchase $50 in gift cards from Benihana through the end of this year, you can receive a $10 promotional card for yourself eligible in the new year. Or purchase $100 in Maggiano’s Little Italy gift cards within the same period and receive a $20 eBonus card.
You can also often score discount gift cards for less than face value through sites like GiftCards.com or find redemption bonuses through your credit card’s rewards portal, like Chase Ultimate Rewards or American Express Membership Rewards.
If you, as an employer, give a gift card to an employee, it may be taxable as income depending on the specific circumstances of the gift. However, like cash, gift cards given by a friend or family member generally fall under the gift tax exemption, so unless you give more than $15,000 worth of gift cards per person, it won’t be taxed.
According to CardCash.com, you should also not be charged sales tax when buying a gift card. Since your recipient will pay sales tax on the item(s) they purchase with the gift card, your initial card purchase shouldn’t incur sales tax.
2. CDs or savings account transfer
Giving the gift of a certificate of deposit or savings account and using it as a teaching tool can be helpful for younger children and teens, according to Oscar Vives Ortiz, wealth strategist at PNC Wealth Management.
“From a learning perspective, a CD or savings account is great,” he says. “You can teach someone to put aside money every so often.”
And it’s a gift that you can build upon year after year. Start by teaching the value of saving money, explain how interest works with a CD and then escalate to earning more over time with savings bonds or other investments.
Not only are you putting away money now for your gift recipient to use in the future, you’re also teaching valuable personal finance habits that can help them earn more throughout their lifetime. Currently, the best one-year CDs earn upward of 2 percent in interest while several high-yield savings accounts yield above 2 percent as well. Do your research beforehand to find a bank offering a minimum balance and term length that works best for you and the person you’re gifting.
Interest earnings on CDs and savings accounts are taxable. The owner of the account will receive a Form 1099-INT with information on interest earned that year from the bank or credit union. Your CD or savings account interest is taxed at the same rate as your income.
Giving a gift recipient a piece of ownership in a company, in the form of shares of stock, is another option.
“If you want the account to grow as much as possible, then probably a gift of stock would (be) better over the long term,” Ortiz says.
Before you dive in, though, take some time to consider your recipient.
For adults, you can simply submit a transfer form to your financial institution to transfer your own shares into their account or transfer a mutual fund to someone with an account at the same institution. If you have individual stocks in mind, you can also purchase shares with popular companies on websites like GiveAShare.
“If you want to give a stock to a minor, you would have to create what’s called an UTMA (Uniform Transfers to Minors Act) account, which is in essence a custodial account where the adult manages the money,” Ortiz says. When the child comes of majority age, then the money is theirs to use however they like.
Ortiz also recommends considering whether a custodial account is actually the best option. In some cases, and depending on the size of your gift, setting up a trust or opening a 529 college savings plan, in which parents can retain more control, may be more effective.
Stocks can be a great gift for teaching the value of investing, or simply a fun way for your recipients to own a share of a company they admire.
The biggest benefit of gifting stock is the possible gains your money may deliver to the gift recipient over time. But it’s also a useful opportunity to educate your recipient on how the stock market works and how money is earned in stocks via capital appreciation and dividends, and actually watch it grow over time.
Depending on whether you’re gifting your own previously held stock or purchasing new stock and what type of account it’s held in, you or your recipient may be liable for capital gains and other tax obligations.
Because there are several different ways in which you can give stock and different tax implications for each (for both you and your recipient), consider speaking with a financial adviser or accountant beforehand to determine the best giving options.
4. 529 contribution
If you’re looking to invest in the future of a child in your life, contribute your money to a 529 plan, which may be used in the future to pay for education expenses like tuition, textbooks and other supplies. Whether your friends recently had a baby and you want to help establish a college fund or your niece or nephew is nearing graduation age, 529 plans are great tax-advantaged investments.
A 529 plan may not be the most exciting gift to a young child, but it can pay off exponentially in the future, especially as student loan debt continues to rise. According to the IRS, there is no limit to the number of 529 plans you’re allowed to set up and you can name anyone as a beneficiary.
“When you’re filling out the FAFSA forms for financial aid, 529 plans are typically not counted as a student asset,” Ortiz says, so it won’t be counted against your recipient’s financial aid awards. You can also transfer unused 529 funds to someone else, if the original beneficiary decides against pursuing higher education.
529 plans are a great way to begin tax-advantaged savings for a child’s education. Your contributions are made after tax, but the money grows tax-free and is not taxed once it’s removed from the account for qualified education expenses. And though there aren’t federal deductions for contributions, many states do offer tax credits or deductions.
When all else fails, stick to the basics.
Give your cash gifts holiday flair by dressing them in a card or money holder. For the extra creative, there are countless ideas online for inventive ways to give cash; you can find guides to DIY anything from dollar bills frozen inside giant ice cubes to cash-filled chocolate candy boxes.
Or keep things virtual by transferring your gift funds into your recipient’s Venmo or Cash App account. You may lose some points in presentation, but P2P payments still give you the opportunity to put your emoji keyboard creativity to the test. It’s also a much faster transfer process for long-distance giving than mailing a check.
If you know someone with international travel plans, you can personalize your gift by gifting cash in a currency they’ll be able to use abroad, such as the euro if they’re heading to Italy. You can also help them save on hefty exchange fees and ensure they’re prepared with some usable cash upon landing.
The biggest benefit of giving cash is simplicity.
While there may be occasions for which giving cash can seem inappropriate or faux pas, it’s also a straightforward gift that you can give and be assured your recipient will use it, rather than regift at the next holiday event of the season.
Cash given as a gift is not considered taxable up to the annual exclusion, which is $15,000 for 2019. If your gift is under this amount, your recipient won’t be responsible for paying taxes on it. This exclusion is applicable for each person gifted, so you can give up to $15,000 per person per year without being taxed on the gifts.
6. Charitable contribution
For those times when you’re still left wondering what to get the person who truly has everything, a monetary donation to a charity or cause they support can be a great way to show you care.
Familiarize yourself with the cause that your recipient champions and make a donation in their name. When it’s time for the gift exchange, you can simply give a card with a message about the donation.
Some charities provide these thank-you cards themselves and may even specify where exactly your donation will go.
Donating to a cause in someone’s name can easily solve your holiday gift indecision for the people in your life who truly seem to have it all. Not only are you helping to aid a cause you and your recipient care about, but you may even inspire others to pay it forward with a donation of their own.
Charitable donations, in addition to doing good for a worthy cause, are also one of the most advantageous gifts for your taxes. Cash donations to qualified charities and non-profit organizations are tax deductible if you choose to itemize your deductions as long as the donations do not exceed 60 percent of your adjusted gross income.