Holiday Gifts That Offer Tax Benefits for You and Your Loved Ones
Author name
Article Highlights:
- Educational Gifts:
- A Gift for the Present
- A Gift for the Future
- Retirement Contributions: A Gift with Long-Term Benefits
- Gifts to Spouses: Supporting Self-Employment
- Employee Gifts: Navigating Tax Implications
- Working Children Gift
- Understanding the Annual Gift Tax Exclusion
- Summary
The holiday season is a time of giving, and while the joy of gifting is often its own reward, there are ways to make your generosity even more impactful through strategic tax planning. By understanding the tax implications of certain gifts, you can maximize the benefits for both the giver and the recipient. This article explores various holiday gifts that come with tax advantages, including educational gifts, gifts to spouses, employee gifts, and contributions to retirement accounts.
Educational Gifts:
- A Gift for the Present
- One of the most meaningful gifts a grandparent can give is the gift of education. Paying a grandchild's college tuition directly to the institution not only supports their educational journey but also provides significant tax benefits. According to IRS rules, such payments are exempt from gift tax and do not count against the annual gift tax exclusion. This means grandparents can pay tuition directly without worrying about gift tax implications.
Moreover, this act of generosity can also benefit the child's parents. If the grandchild is claimed as a dependent, the parents may be eligible for education tax credits, such as the American Opportunity Tax Credit (AOTC). This credit can reduce the amount of tax owed by up to $2,500 per eligible student, providing a financial boost to the family. Thus, paying tuition can be seen as a dual gift: one to the grandchild in the form of education and another to the parents in the form of a tax credit.
Moreover, this act of generosity can also benefit the child's parents. If the grandchild is claimed as a dependent, the parents may be eligible for education tax credits, such as the American Opportunity Tax Credit (AOTC). This credit can reduce the amount of tax owed by up to $2,500 per eligible student, providing a financial boost to the family. Thus, paying tuition can be seen as a dual gift: one to the grandchild in the form of education and another to the parents in the form of a tax credit.
- A Gift for the Future
- Donating to a Section 529 plan can be a thoughtful and practical holiday gift that combines the spirit of giving with valuable tax benefits. A 529 plan is a tax-advantaged savings account designed to encourage saving for future education expenses. Contributions to a 529 plan grow tax-deferred, and qualified withdrawals are tax-free when used for eligible education expenses, such as tuition, room and board, and other related costs. One of the most attractive aspects of gifting to a 529 plan is that contributions are considered completed gifts for tax purposes, which means they qualify for the annual gift tax exclusion. For the 2025 tax year, individuals can gift up to $19,000 per recipient ($38,000 for a married couple) without triggering gift taxes or reducing their lifetime gift and estate tax exemption.
Additionally, the 529 plan offers a unique five-year election option that allows individuals to supercharge their gift by front-loading contributions. This option permits contributors to treat a contribution as if it were spread over five years for gift tax purposes, up to five times the annual exclusion amount. For instance, a single contributor could donate up to $95,000 in one year ($190,000 for a married couple) without incurring gift tax consequences, provided no additional gifts are made to the same beneficiary during the five-year period. This feature enables grandparents or other family members to make significant contributions to a child's education fund while effectively reducing their taxable estate, making it an excellent strategy for both holiday giving and long-term financial planning.
Retirement Contributions: A Gift with Long-Term Benefits
Providing the funds for someone to contribute to their retirement account, such as a traditional IRA, can be a gift that provides long-term benefits. For the gift recipient, contributions they make to a traditional IRA may be tax-deductible, reducing their taxable income for the year. This deduction can be particularly beneficial for individuals in higher tax brackets who aren’t covered by an employer’s retirement plan.
The annual contribution limit for IRAs is subject to change, so it's important to check the current limits. For 2025, the limit is $7,000, or $8,000 for those aged 50 and over. By helping a loved one contribute to their traditional IRA, you are not only helping them save for retirement but also potentially providing them with immediate tax savings.
Gifts to Spouses: Supporting Self-Employment
Gifting items to a spouse that are used in their self-employment can be both a thoughtful gesture and a savvy tax move. For instance, if your spouse is self-employed and you gift them a new laptop or office equipment, these items can be deducted as business expenses on their tax return. This deduction reduces the taxable income from their business, potentially lowering their overall tax liability.
It's important to ensure that the gifted items are indeed used for business purposes and that proper documentation is maintained. Receipts and records of business use should be kept substantiating the deduction in case of an audit. This strategy not only supports your spouse's business endeavors but also provides a financial benefit through tax savings.
Working Children Gift:
Contributing to a Roth IRA on behalf of working children or grandchildren can be a profoundly impactful holiday gift that is rich with future potential. Young earners often overlook retirement planning, preferring to spend their hard-earned money on immediate needs or desires rather than contributing to retirement accounts. By stepping in to make a Roth IRA contribution, you are not only teaching the importance of early saving but also providing a gift that grows with them. Contributions to a Roth IRA are made with after-tax dollars, allowing for tax-free growth and tax-free withdrawals in retirement, provided certain conditions are met. Even modest contributions, when given the advantage of time, can accumulate significantly thanks to the power of compound interest. For example, a $1,000 contribution made today for a young worker can potentially grow to tens of thousands of dollars by retirement age, depending on the rate of return. This simple gesture not only helps secure their financial future but also imparts a valuable lesson in financial planning, making it a cherished and enduring holiday gift.
Employee Gifts: Navigating Tax Implications
Many employers choose to show appreciation to their employees during the holiday season through gifts. However, it's crucial to understand the tax implications associated with different types of gifts.
- De Minimis Fringe Benefits: These are gifts of minimal value, such as holiday turkeys or small gift baskets, which are not subject to taxation for the employee. The employer can deduct the cost of these gifts as a business expense.
- Cash and Cash Equivalents: Gifts of cash, gift cards, or any item that can be easily converted to cash are considered taxable income for the employee. These must be reported as wages and are subject to payroll taxes. Employers should issue these gifts through payroll to ensure proper tax withholding.
- Non-Cash Gifts: Items that are not easily convertible to cash, such as a company-branded jacket, may not be taxable if they fall under the de minimis threshold. However, more valuable items may need to be reported as income.
Understanding the Annual Gift Tax Exclusion
The annual gift tax exclusion is a key consideration when planning holiday gifts. For 2025, the exclusion amount is $19,000 per recipient. This means you can give up to $19,000 to any number of individuals without incurring gift tax or needing to file a gift tax return. Married couples can combine their exclusions to give up to $38,000 per recipient.
Gifts that exceed the annual exclusion may require the filing of Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. These excess amounts also count against the lifetime gift and estate tax exemption, which is $13.99 million for 2025.
By staying within the annual exclusion limits, you can make generous gifts without affecting your lifetime exemption or incurring additional tax obligations.
Summary
The holiday season offers a unique opportunity to give gifts that not only bring joy but also provide financial benefits through tax savings. Whether it's paying a grandchild's tuition, supporting a spouse's business, gifting employees, or contributing to a retirement account, understanding the tax implications can enhance the impact of your generosity.
By strategically planning your holiday gifts, you can maximize the benefits for both you and the recipients, ensuring that your gifts continue to give long after the holiday season has passed. Always consult with a tax professional to ensure compliance with current tax laws and to tailor your gifting strategy to your specific financial situation.
If you have questions, give this office a call.
This generation doesn’t wait for a paycheck. They create income on their own terms. Selling products online. Editing videos for clients. Running social media accounts. Picking up freelance work between classes or jobs. It’s flexible. It’s fast. And in a lot of cases, it works. But there’s one part no one really talks about: Most of it isn’t being tracked—or taxed—correctly. And that mistake doesn’t show up right away… it shows up later, all at once. The New Income Reality (That No One Really Explains) For Gen Z, income rarely comes from just one place. It’s usually a mix: A part-time job A few freelance clients Money from a side hustle Payments from apps or platforms Maybe even a little creator income Individually, none of it feels like a big deal. But combined? It absolutely is. Because from a tax perspective, it’s all income—and it all needs to be accounted for. Where Things Start to Go Wrong The problem isn’t effort. It’s that no one really teaches this. So a lot of people assume: “If it’s small, it doesn’t matter” “If I didn’t get a form, I don’t need to report it” “I’ll deal with it when I file” That last one is where most issues start. Because by the time you “deal with it,” the decisions that mattered have already been made. Mistake #1: Not Tracking Income Clearly When money comes in from multiple places, it’s easy to lose track. A few payments here. A deposit there. Something paid through an app that you forget about. But over time, it adds up. And without a clear record: You don’t know what you actually earned You can’t report accurately You’re more likely to miss income At the same time, many platforms are now reporting earnings directly. So if your numbers don’t match what’s reported… That’s when problems start. Mistake #2: Ignoring Estimated Taxes This is where most first-time earners get caught off guard. If you’re making money without taxes being withheld—like freelance work, side gigs, or creator income—you’re expected to pay taxes throughout the year. Not just once at filing. These are called estimated tax payments. And if you skip them, you may end up with: Penalties Interest A much larger bill than expected It’s not obvious—but it’s important. Mistake #3: Misunderstanding Write-Offs Write-offs get talked about a lot online. But they’re often misunderstood. A write-off isn’t: Everything you buy Anything loosely related to your work A way to avoid taxes entirely It has to be both: Ordinary and necessary for what you do. For example: A content creator can deduct editing tools or software A freelancer can deduct business-related subscriptions An online seller can deduct inventory costs But guessing—or copying advice from social media—can lead to mistakes. Mistake #4: Overlooking How Income Is Reported Today The way income is tracked has changed. More transactions are being reported: Payment apps Online platforms Digital marketplaces And in some cases, things like crypto or digital assets can also trigger reporting requirements. In other words: There’s less room for things to go unnoticed. Which makes it even more important to stay organized from the start. Why This Matters Earlier Than You Think Getting this wrong once? Usually fixable. But when it keeps happening, it builds: Back taxes Penalties Stress Missed opportunities to save The good news? Gen Z has an advantage most people don’t: Time to get this right early. The Opportunity: Build Good Habits Now When you understand your income and taxes early, you: Keep more of what you earn Avoid surprises at tax time Make better financial decisions Build confidence as your income grows It doesn’t have to be complicated. But it does have to be intentional. Final Thought Earning money in new ways is a huge opportunity. But without structure, it can also create unnecessary problems. The goal isn’t to overcomplicate things— It’s to get the basics right early, so everything gets easier as you grow. If you (or someone in your family or team) is earning income from multiple sources and is not sure how it all fits together, we're here for you. The earlier you get this right, the easier everything becomes. Request your free quote from Steven Brewer & Company CPAs today!
Hiring feels like growth. More people. More capacity. More momentum. But here’s what most business owners underestimate: The salary is just the starting point. By the time you factor in everything else, that “$70,000 hire” can quietly become a $90,000—or even $100,000—decision. And if you don’t plan for it? Hiring can slow your business down instead of moving it forward. Why Hiring Feels Simpler Than It Actually Is On paper, hiring looks straightforward. You need help. You set a salary. You make the offer. But the real cost doesn’t show up in the offer letter. It shows up in everything that comes after. The True Cost Breakdown (What Most People Miss) Salary is only one piece of the equation. Here’s what actually gets added on: 1. Payroll Taxes Employers are responsible for their share of: Social Security and Medicare Federal and state unemployment taxes That alone can add 7–10%+ on top of base salary. 2. Benefits (Even Basic Ones Add Up) Depending on your setup, this may include: Health insurance contributions Retirement plans Paid time off Even modest benefits packages can significantly increase your total cost per employee. 3. Software, Tools, and Equipment Every new hire needs access to: Software subscriptions Systems and platforms Equipment or workspace Individually small. Collectively meaningful. 4. Management and Training Time This is the most overlooked cost. New hires require: Onboarding Training Ongoing management Which means someone on your team is spending time not doing their core work. That’s a real cost—even if it doesn’t show up on a payroll report. Full-Time vs. Contractor: Not Always an Obvious Choice Hiring full-time isn’t always the best first move. In many cases, a contractor or fractional role can: Reduce upfront costs Eliminate benefit obligations Provide specialized expertise Give you flexibility as you grow This is why more businesses are turning to: Fractional CFOs Outsourced marketing teams Contract-based specialists It’s not about avoiding hiring. It’s about hiring intentionally. When Hiring Actually Hurts Growth It sounds counterintuitive—but hiring too early can create pressure instead of relief. Here’s how it happens: Revenue isn’t consistent yet Cash flow tightens Fixed payroll costs increase You feel pressure to “feed” the hire Instead of freeing you up… It adds stress to every decision. Growth doesn’t just come from adding people. It comes from adding people at the right time. A Smarter Approach to Hiring Decisions Before you make your next hire, ask: Is this role tied directly to revenue or efficiency? Can this function be outsourced first? Do we have consistent cash flow to support this long-term? What is the fully loaded cost—not just the salary? Because clarity here protects you later. What Strong Businesses Do Differently They don’t just hire when they feel busy. They hire when the numbers support it. They: Forecast the full cost Understand the ROI of the role Use flexible resources when needed Scale their team strategically—not reactively That’s what keeps growth sustainable. Final Thought Hiring is one of the biggest investments you’ll make in your business. Done right, it accelerates growth. Done too early—or without a full picture—it can slow everything down. The difference isn’t instinct. It’s clarity. Before your next hire, run the numbers—not just the salary. Contact Steven Brewer & Company CPAs today to evaluate the true cost of hiring, explore smarter staffing options, and make confident decisions that support long-term growth.
June 2026 Individual Due Dates June 1 - Final Due Date for IRA Trustees to Issue Form 5498 Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2025. The FMV of an IRA on the last day of the prior year (Dec. 31, 2025) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 73 or older during 2026. June 10 - Report Tips to Employer If you are an employee who works for tips and received more than $20 in tips during May, you are required to report them to your employer no later than June 10. You can use IRS Form 4070 or your own statement that includes your signature; name, address and Social Security number; employer's name (or establishment's name if different) and address; month or period the report covers, and total of tips received during that month or period. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 8 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed. June 15 - Estimated Tax Payment Due This is the last day to timely make your second quarter estimated tax installment payment for the 2026 tax year. Our tax system is a "pay-as-you-earn" system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the "pay-as-you-earn" requirement. These include: Payroll withholding for employees; Pension withholding for retirees; and Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding. When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis. Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the "de minimis amount"), no penalty is assessed. In addition, the law provides "safe harbor" prepayments. There are two safe harbors: The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty. The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year's tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year's safe harbor is 110%. Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can't avoid the penalty under this exception. However, in the above example, the safe harbor may still apply. Assume your prior year's tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year's tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty. This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible. CAUTION: Some state de minimis amounts, safe harbor estimates rules, and the dates estimate payments are due are different than those for the Federal estimates. Please call this office for particular state safe harbor rules. June 15 - Taxpayers Living Abroad If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, June 15 is the filing due date for your 2025income tax return and to pay any tax due. Those impacted by the terrorist attacks in Israel throughout 2024 and 2025 have until September 30, 2026, to file and pay taxes that are otherwise due on or after September 30, 2025, and before September 30, 2026. The Sept. 30, 2026 extension also applies to time-sensitive tax acts that were previously postponed by IRS. If your return has not been completed and you need additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then, file Form 1040 or 1040-SR by October 15. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline (see below). Caution: This is not an extension of time to pay your tax liability, only an extension to file the return. If you expect to owe, estimate how much, and include your payment with the extension. If you owe taxes when you do file your extended tax return, you will be liable for both the late payment penalty and interest from the due date. Combat Zone - For military taxpayers in a combat zone/qualified hazardous duty area, the deadlines for taking actions with the IRS are extended. This also applies to service members involved in contingency operations, such as Operation Iraqi Freedom or Enduring Freedom. The extension is for 180 consecutive days after the later of: The last day a military taxpayer was in a combat zone/qualified hazardous duty area or served in a qualifying contingency operation, or has qualifying service outside of the combat zone/qualified hazardous duty area (or the last day the area qualifies as a combat zone or qualified hazardous duty area), or The last day of any continuous qualified hospitalization for injury from service in the combat zone/qualified hazardous duty area or contingency operation, or while performing qualifying service outside of the combat zone/qualified hazardous duty area. In addition to the 180 days, the deadline is also extended by the number of days that were left for the individual to take an action with the IRS when they entered a combat zone/qualified hazardous duty area or began serving in a contingency operation. It is not a good idea to delay filing your return because you owe taxes. The late filing penalty is 5% per month (maximum 25%) and can be a substantial penalty. It is generally better practice to file the return without payment and avoid the late filing penalty. We can also establish an installment agreement, which allows you to pay your taxes over a period of up to 72 months. Please contact this office for assistance with an extension request or an installment agreement. Weekends & Holidays: If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. Disaster Area Extensions: Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites: FEMA: https://www.fema.gov/disaster/declarations IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations June 2026 Business Due Dates June 15 - Employer's Monthly Deposit Due If you are an employer and the monthly deposit rules apply, June 15 is the due date for you to make your deposit of Social Security, Medicare, and withheld income tax for May 2026. This is also the due date for the nonpayroll withholding deposit for May 2026 if the monthly deposit rule applies. June 15 - Corporations Deposit the second installment of estimated income tax for 2026 for calendar year corporations. Weekends & Holidays: If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. Disaster Area Extensions: Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites: FEMA: https://www.fema.gov/disaster/declarations IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations Are you looking for a CPA? Steven Brewer & Company is here for you! Request a quote with us today!