Are you planning to sell stocks or stock funds to help finance a child’s education? Before you sell at a profit, give the shares to the child. (A married couple can give up to $20,000 worth of assets to each child each year, free of gift tax.)
Then the child can sell the stocks or stock fund shares. The taxable gain will be the same but it likely will be taxed at 10%, not 20%. That assumes the child is 14 or older and does not report more than $25,000 worth of taxable income.
Now there’s an even better deal on truly long-term gains. Starting in 2001, gains on investments held longer than five years may qualify for a bargain 8% rate. If the assets are sold by a taxpayer in the lowest 15% bracket, the rate is 8% no matter when the securities were purchased.
