Families want to give their kids or grandkids a financial head start, but they often assume doing it the “right way” means navigating complex IRS rules, complicated paperwork, and gift taxes.
There are built-in tax advantages for families, but most people don’t know how to make the most of them.
In this short video, CPA Sheila Coomes and Chad Chase, share the exact strategic tools you can use right now to transfer wealth to the next generation in a tax-efficient way.
Watch now!
Frequently Asked Questions About Gifting Money to Kids and Grandkids Without Tax
What is the annual gift tax exclusion for children and grandchildren?
In 2026, individuals can give up to $19,000 per recipient each year without triggering gift tax reporting requirements. Married couples can combine their exclusions and give up to $38,000 per recipient annually. This allows many families to transfer wealth to children and grandchildren over time without creating gift tax concerns.
Can grandparents help fund a grandchild’s college savings without paying gift tax?
Yes. One strategy involves contributing to a 529 college savings plan using a provision known as “superfunding.” This allows an individual to contribute up to five years’ worth of annual gift tax exclusions at once and spread the gift over five years for tax purposes. Families considering larger education gifts may benefit from discussing the strategy with both a financial advisor and tax professional.
Can parents or grandparents contribute to a child’s Roth IRA?
Yes, provided the child has earned income. A parent or grandparent can contribute to a child’s Roth IRA on their behalf, as long as the contribution does not exceed the child’s earned income or the annual contribution limit. For families looking to transfer wealth across generations in a tax-efficient way, CGN Advisors can help evaluate how Roth IRA funding, 529 plans, and other gifting strategies may fit into a broader financial plan.
Transcript
How Much Money Can You Give to Kids or Grandkids Tax-Free in 2026?
Chad: Many families are already providing financial support to their kids or grandkids for things like birthdays, holidays, help with a down payment, or maybe a check at graduation. What they don’t always know is whether any of it created a tax problem. The good news for most families is that it probably didn’t, but it’s worth understanding the rules so you can give intentionally and not accidentally.
I’m Chad Chase, and today I’m sitting down with Sheila Coomes, our CPA and tax advisor here at CGN Advisors. So, Sheila, let’s start with probably the most common question: If I just want to write a check to my kids or grandkids, is there a limit?
Sheila: Well, Chad, yes, there is a limit, but it’s actually more generous than many think.
What Is the 2026 Annual Gift Tax Exclusion?
Sheila: So in 2026, you can give up to $19,000 per person per year. Generally, no gift tax or paperwork required. And if you and your spouse both give, that’s $38,000 in a single year to the same recipient, and it resets every January 1st.
So this is something families can do consistently and over time.
Chad: So a couple with four grandkids could give over $150,000 in a single year and never file a form?
Sheila: Yeah, that’s right. Most families are well within that range and don’t realize how much room they actually have.
It’s one of those tax rules that’s actually pretty straightforward.
Chad: So what about someone who wants to give a more significant amount at once so they can really fund a child’s or grandchild’s college savings?
Sheila: Yeah, that’s actually where the 529 plans come in and have a special advantage. It’s called superfunding.
How Does 529 Superfunding Work for Children and Grandchildren?
Sheila: So you can front-load up to $95,000 in a single year or $190,000 as a couple and spread it out over five years for gift tax reporting purposes. You file a Form 709 to make that election, and that’s not a tax bill, it’s simply a reporting form.
Chad: So I think that’s an important distinction. People often hear “gift tax return” and they assume they owe money, but that sometimes isn’t the case.
Sheila: Right, and in most cases they don’t know anything.
Does Filing a Gift Tax Return Mean You Owe Gift Tax?
Sheila: So the lifetime gift and estate tax exemption in 2026 is $15 million per person. So for most of the families we work with, there’s actually never any tax due. And the form is really just a documentation of the gift for the IRS.
Chad: That’s one strategy I want to make sure we cover because it surprises people every time.
So, how do you fund a Roth IRA for a teenager who has a job?
Sheila: Oh, yeah. So as long as the child has earned income from a summer job or otherwise, such as babysitting, maybe lawn care, they’re actually eligible to go ahead and contribute to a Roth IRA.
Can a Parent or Grandparent Fund a Roth IRA for a Teenager?
Sheila: Now, there is a catch: it has to be for real services performed on behalf of another. So standard household chores and parental allowance don’t count.
But the 2026 IRA contribution limit is $7,500 or their total earned income, whichever is less. So if they earn $2,000, they can contribute $2,000. And the great thing is a parent or a grandparent can make that contribution on their behalf.
It doesn’t actually have to come out of the child’s pocket as long as they’ve earned the income. So just two rules to keep in mind: first, make sure that we’re tracking the dates, the client’s names, the services, and the amounts that they earn to make sure we have a clean paper trail.
What Earned Income and Recordkeeping Rules Apply to a Child’s Roth IRA?
Sheila: And second, if they’re paid in cash over $400, they’re required to file a tax return.
Chad: So a grandparent funds it and the child gets decades of tax-free growth ahead of them.
Sheila: Yeah, exactly.
So starting at age 15 instead of 35, that’s a huge difference in the long-term growth. It’s significant. And because the contribution stays under that annual exclusion, no additional tax filings are required.
How Financial Advisors and CPAs Can Help With Family Gifting Strategies
Chad: This is exactly the kind of conversation our clients benefit from having. With both their advisor and their CPA in the same room, it’s beneficial. Most families can actually gift money to kids tax-free far more extensively than they realize, provided you start early and deliberately plan around them.
Would you like to talk through what makes sense for your family? Give us a call at 785-340-3434 or visit us on the web at cginadvisors.com. Thanks for joining us today.