If I give money to my children this year up to the limit of 18K per child, will this reduce my taxable income from Social Security and RMDs? If so, by how much? For example, if my income combined was 100K and I give each of my children 18K, does this reduce my tax burden?
Thank you for your answer.
Giving your children money in any amount will not impact your RMD, social security, or taxable income in any way. It also does not impact your tax burden. There are repercussions if you exceed your lifetime gift exemption, but that amount is $13.99 million in 2025, a figure that most of us don't have to worry about.
The benefit of giving them money ($19k per individual is the limit for 2025) is that it reduces the likelihood that they will pay income taxes in the future if you pass away and they inherit any of your taxable financial assets. Let's say that you give them $10k every year for the next ten years, for a total of $100k. They are not taxed at all on that amount, which is good for them. Let's say instead that you gave them nothing for ten years, but you left them your traditional IRA balance of $100k. They will be subject to income tax on that amount.
Great question; I hope this helps!
Giving your children money in any amount will not impact your RMD, social security, or taxable income in any way. It also does not impact your tax burden. There are repercussions if you exceed your lifetime gift exemption, but that amount is $13.99 million in 2025, a figure that most of us don't have to worry about.
The benefit of giving them money ($19k per individual is the limit for 2025) is that it reduces the likelihood that they will pay income taxes in the future if you pass away and they inherit any of your taxable financial assets. Let's say that you give them $10k every year for the next ten years, for a total of $100k. They are not taxed at all on that amount, which is good for them. Let's say instead that you gave them nothing for ten years, but you left them your traditional IRA balance of $100k. They will be subject to income tax on that amount.
Great question; I hope this helps!