Finding the perfect gift for a birthday, graduation or other special occasion is often a challenge.
Whether you don’t know your recipient well or you’re looking for the perfect gift for someone who seems to have it all, gifting cash can often be the perfect solution. Cash is simple and an easy way to guarantee your gift will be put to use.
But how can you give cold hard cash without coming across as, well, cold? Here are some options to help you personalize your monetary giving and ensure the most thoughtful gift for each person on your list.
1. Gift card
You’ll rarely go wrong giving a gift card. If you know your recipient well, you can seek out their favorite store, brand or restaurant. And if they’re harder to shop for or you’re not very close, there’s nothing wrong with choosing a Visa or American Express prepaid cash card. Pair it with a heartfelt note to show how much you care about them and their interests.
If you are still wary of coming across a bit too impersonally, try using a gift card to give an experience. Prepay for a couple of movie dates or a trip to the spa where you can spend time together and enjoy a nice treat.
You may even score a bonus for yourself when you buy a gift card. Throughout the year, especially around the holidays, many restaurants and retail stores offer a bonus card for you when you spend a minimum amount on a gift card for someone else.
You can also often score discount gift cards through sites like GiftCards.com or find redemption bonuses on your credit card’s rewards portal, like Chase Ultimate Rewards.
If you, as an employer, give a gift card to an employee, it may be taxable as income depending on the specific circumstances of the gift. However, like cash, gift cards given by a friend or family member are generally fall under the gift tax, so unless you give more than $15,000 worth of gift cards per person, it won’t be taxed.
According to CardCash.com, you should also not be charged sales tax when buying a gift card. Since your recipient will pay sales tax on the item(s) they purchase with the gift card, your initial card purchase shouldn’t incur sales tax.
2. CDs or savings account transfer
Using a certificate of deposit or savings account gift as a learning opportunity is especially helpful for younger children and teens, says Oscar Vives Ortiz, wealth strategist at PNC Wealth Management.
“From a learning perspective, a CD or savings is great,” he says. “You can teach someone to put aside money every so often.”
For an ongoing financial gift plan, start by teaching the value of saving money, move on to explain how interest works with a CD and then escalate to earning over time with savings bonds or other investments.
Not only are you putting away money that your recipient can use in the future, you’re also teaching valuable habits that can help them earn more throughout their lifetime. A CD may earn upwards of 2.5 percent while several high-yield savings accounts earn at least 2 percent. Find a bank that has the minimum balance and term length that works best for you and the person you’re gifting.
Interest earnings on CDs and savings accounts are taxable. The owner of the account will receive a Form 1099-INT with information on interest earned that year from the bank or credit union. This may fluctuate depending on when the interest is paid. Your CD or savings account interest is taxed at the same rate as your income.
“If you want the account to grow as much as possible, then probably a gift of stock would make that better over the long term,” Ortiz says. Before you dive in, though, consider your recipient.
For adults, you can simply submit a transfer form to your financial institution to transfer your own shares into their account or transfer a mutual fund to someone with an account at the same institution. If you have individual stocks in mind, you can purchase shares with popular companies on websites like GiveAShare.
“If you wanted to give a stock to a minor, you would have to create what’s called an UTMA (Uniform Transfer to Minors Act) account, which is in essence a custodial account where the adult manages the money,” Ortiz says. When the child comes of majority age, then the money is theirs to use however they like.
Ortiz recommends considering whether a custodial account is the best option based for the individual child. In some cases, and depending on the size of your gift, a trust or 529 plan, where parents can retain more control, may be more effective.
Stocks can be a great gift for teaching the value of investing or simply a fun way for your recipients to have a share of a company they admire.
The biggest benefit of a stock gift is, of course, the possible gains your money may see over time. Giving stock as a gift is a great opportunity to educate your recipient on how the market works and how money is earned in stocks, and then actually watch it grow over time.
Depending on whether you are gifting your own previously held stock or purchasing new stock and what type of account it’s held in, you and/or your recipient may be liable for capital gains and other tax obligations.
Because there are several different ways in which you may gift stock and different tax implications for each (for both you and your recipient), consider speaking with a financial advisor beforehand to determine the best giving options.
4. 529 contribution
If you’re looking to invest in the future of a child in your life, contribute your cash gift to a 529 plan, which can be used in the future to pay for education expenses like tuition, textbooks and even computers. Whether your friends recently had a baby and you want to help establish a college fund or your niece or nephew will soon be applying to colleges, 529 plans are great tax-advantaged investments.
A 529 plan may not be the most exciting gift to a young child, but it can definitely pay off exponentially in the future, especially as student loan debt continues to rise. According to the IRS, there is no limit to the number of 529 plans you may set up and you can name anyone as a beneficiary.
“When you’re filling out the FAFSA forms for financial aid, 529 plans are typically not counted as a student asset,” Ortiz says, so it won’t be counted against financial aid awards. You can also transfer unused 529 funds to someone else, if the original beneficiary decides against pursuing higher education.
529 plans are a great way to begin tax-advantaged savings for a child’s education. While your contributions are made after-tax, the money is not taxed once it’s removed from the account for qualified education expenses. And though there aren’t federal deductions for contributions, many states do offer tax credits or deductions, according to SavingForCollege.com.
When all else fails, stick to the basics.
You can dress up cash gifts in a nice card or money holder for added flair. For the extra creative, there are nearly limitless ideas online for inventive ways to give cash; you can find guides to DIY anything from cash frozen into giant ice cubes to cash-filled chocolate candy boxes.
If you want to keep things virtual, simply transfer your gift funds into their Venmo or Cash App account. You’ll definitely lose some points in presentation, but P2P payments are a great opportunity to put your emoji keyboard skills to the test. It’s also a much faster transfer process for long-distance giving than mailing a check.
For someone with international travel plans next year, consider gifting a bit of currency from the country they’re visiting. You can help them save on hefty exchange fees and ensure they’re prepared with some usable cash.
The biggest benefit of giving cash as a gift may just be it’s simplicity.
While there may be occasions where giving cash can seem inappropriate or faux pas, it’s also a straightforward gift that you can give with assurance that your recipient will use it.
Cash given as a gift is not considered taxable up to the annual exclusion, which is $15,000 for 2019. If your gift is under this amount, your recipient won’t be responsible for paying taxes on it. The exclusion also applies per person, so you can give up to $15,000 per person per year without being taxed on the gifts.
6. Charitable contribution
For those times when you’re still left wondering what to get the person who truly has everything, a monetary donation to a charity or cause they support can be a great way to show you care.
Familiarize yourself with the cause that your recipient champions and make a donation in their name. When it’s time for the gift exchange, you can simply give a card with a message about the donation.
Some charities provide these thank-you cards and may even specify where exactly your donation will go.
Giving a charitable contribution in someone’s name can solve your gift-giving indecision when it comes to the people in your life who truly seem to have everything. Not only are you helping to aid a cause you and your recipient care about, but you may even inspire others to pay it forward with a donation of their own.
Charitable donations, in addition to doing good for a worthy cause, are also one of the most advantageous gifts for your taxes. Cash donations to qualified charities and non-profit organizations are tax deductible if you itemize your deductions as long as the donations do not exceed 60 percent of your adjusted gross income.
This story was originally published on Bankrate. Create an account on Bankrate today to get your free credit report along with expert advice to improve your score. Plus, set your financial goals to personalize your dashboard with resources to help you reach them.