Gifting stock is relatively easy to do, and in some instances can offer perks for the gift giver, too. Buying stock as a present can also be a great way to introduce a child or young person to investing. It's a financial gift that, unlike a wad of cash, keeps on giving well after it's first received by investors of any age. 

Here's what you need to know about how to buy and give shares properly.

How to gift stock

If the stock recipient is the age of majority, typically 18 or 21, stocks can be given through a regular brokerage account such as at Charles Schwab, Fidelity Investments or Vanguard. 

You can purchase shares within your brokerage and transfer them to the recipient, but this could incur a fee. 

"To avoid the fee, you can give your gift recipient cash to purchase the shares on their own," Brett Holzhauer, a personal finance expert at M1, an investing app, told CBS MoneyWatch.

Can you gift stock you already own?

People can transfer shares of stock they already own to others, or purchase new stocks and transfer ownership to a recipient of their choice. 

Givers can gift shares of stock they already own by transferring them to a recipient's account. It's important to note that as the new owner of the stock, the recipient assumes liability for any applicable capital gains taxes.

For example, if you bought shares of a technology company's stock for $10,000 that are now worth $200,000, the recipient would have to pay capital gains tax on the $190,000 increase in value if they were to sell the stock. If someone in a top tax bracket gifts the shares to a low-income earner, that recipient would pay a lower tax rate. 

"If a high-income earner like a doctor gifts it to their nephew who is 22 and just got out of college, their capital gains tax bracket might be lower, if they want to cash it in," certified financial planner Katie Brewer told CBS MoneyWatch.

How much you can give?

For 2023, the maximum an individual can give without reporting the gift to the IRS is $17,000, or $34,000 for a couple. 

To be sure, gift givers can be more generous, but any gift amount that exceeds those thresholds must be reported to the IRS. The gift won't necessarily be taxable, but its amount will be applied toward the lifetime gift estate tax exclusion, which is close to $13 million per person. 

"You just have to file a form and it eats into the lifetime gift estate tax exclusion, which the vast majority of Americans don't have to worry about. You don't have to pay taxes unless you've given away $13 million," Brokamp said. 

Things to consider when giving a stock to a child

Minors can't own stock outright until they reach the age of majority in their state, which in most states is 18. Until then, their investments must be held under the supervision of an adult in what's known as a custodial account. 

So, if say a grandparent wants to give stock to a young grandchild, the minor can't technically be in charge of their own account right away. 

"They'll own it, but can't control it until the kid reaches age of majority in the state, then they can do whatever they want with it," Robert Brokamp, a certified financial planner and adviser to The Motley Fool, told CBS MoneyWatch.

What stock should you give?

Especially if there's no physical certificate, shares of stock can sound like an underwhelming gift to a little kid who is new to investing. 

Brewer recommends gifting brand name stocks such as Coca-Cola or Johnson & Johnson, whose products would be recognizable to almost anyone. 

"Johnson & Johnson is not sexy, but kids can turn around the bottle of shampoo they use and it says the company's name on it," Brewer said.  "Giving them a few shares of a household name they might associate with something they use or play with is a great idea."

Brokamp recommends adding a small physical token to the gift of stock, too. 

"If you give them Disney stock, include a Disney toy, or if you buy Target stock, give them a gift card to Target too," he said. 

Megan Cerullo

Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News streaming to discuss her reporting.

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