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Did You Know…?

January 22, 2018 | Weekly Commentary

The annual limit for gifts (to family members or other individuals) in 2018 has been raised to $15,000. Such gifts are free of income taxes for both the person giving the gift as well as the person receiving the gift.

Tax Tips you can use

Speaking of gifts, one the best gifts to consider is a gift to your child to jump start your child’s Roth IRA. The maximum Roth IRA contribution equals the lesser of $5,500 per year or up to the amount of the child’s earned income. A gift of $11,000 would fund both 2017 and 2018 Roth contributions. Assuming your child is age 25, this $11,000 could grow to equal  $165,700 at age 65, if it averages 7% per year. The entire $165,700 can be withdrawn at that time TAX-FREE.

Disclosure: 7% rate of return is used for illustrative purposes only. There is no assurance this rate of return will be achieved. Investments are not FDIC insured and may lose money.