Graduation season is here, and if you’re wondering whether it’s okay to tuck a little cash into that card: yes, it is.
Money is the universal gift language. But before you Venmo a fistful of dollars to your favorite grad, let’s talk about how to do it the smart way, without tripping over tax rules.
1. Understand the Annual Gift Tax Exclusion
The IRS lets you gift up to $19,000 per person per year (for 2025) without having to file a gift tax return. That’s per recipient, so if you want to give $19K to every niece, nephew, neighbor, and the barista who’s headed to college, go for it.
Just don’t go over that amount unless you want to get cozy with Form 709.
2. Joint Gifts = Double the Fun
Married couples can each give $19,000. That means together, you and your spouse can hand over $38,000 to your college-bound cousin without triggering any extra paperwork. Congrats: you’re now officially a tax-savvy power couple.
3. Tuition Gifts? Pay the School Directly
Want to help cover tuition? If you pay the college or university directly, it doesn’t count toward your $19,000 limit. This IRS loophole is like a cheat code for generous aunts and uncles everywhere.
Heads-up: This only works for tuition—not books, housing, or late-night pizza.
4. 529 Plans: The Grad Gift That Keeps on Giving
Contributing to a 529 college savings plan can be another smart move. Not only does it help fund education, but you can front-load five years’ worth of gifts (that’s $90,000 per person) without getting hit with gift tax—just make sure you file the paperwork correctly.
Bonus: Some states offer tax deductions for contributions. That’s a win for the grad and your wallet.
5. Cash Is Cool, But So Is Clarity
If you’re gifting cash or checks, make it clear it’s a gift, not a loan. And remember, once it’s given, it’s theirs. No strings, no IOUs, no “this is for books only, not a new tattoo.”
One last thing: Money may not grow on trees, but tax surprises sure do. If you’re giving a big gift—or just want to make sure you’re doing things right—Smith Patrick CPAs is here to help. Our team can walk you through the rules and help you give generously and wisely. Because giving money should feel good and not give you a headache.
More Information
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Smith Patrick CPAs
Smith Patrick CPAs is a growing firm based in St. Louis, MO. From accounting to wealth management, our team takes a consultative approach. We provide excellent, personal service to small businesses and financially active individuals. It’s our goal to help you to make the best decisions, saving you money and headaches.
About Smith Patrick CPAs
Smith Patrick CPAs is a boutique, St. Louis-based, CPA firm dedicated to providing personal guidance on taxes, investment advice and financial service to forward-thinking businesses and financially active individuals. For over 30 years, our firm has focused on providing excellent service to business owners and high-net worth families across the country. Investment Advisory Services are offered through Wealth Management, LLC, a Registered Investment Advisor.
