Jeremy Keil explains 3 smart ways to help your kids with money while avoiding IRS paperwork

Early in the year, I received an email from a couple asking a question I hear all the time:

“What’s the maximum we can give our kids?”

That question usually shows up in December. Parents are trying to get a last-minute gift in before the year ends, and the conversation quickly becomes about tax limits.

But that’s the wrong starting point.

If you’re thinking about giving money to your kids, the first question shouldn’t be “How much can I give?”

The better question is “What problem am I trying to solve?”

Many financial mistakes don’t come from bad intentions. They come from rushed decisions. And when it comes to family money, rushed decisions can create tax surprises—or even family tension.

If 2026 is the year you’re considering helping your kids financially, the smartest move is to think it through early.

Why Giving Money Isn’t Always the Solution

Financial gifts don’t always produce the results we hope for.

In fact, research highlighted in The Millionaire Next Door suggests that frequent financial gifts can sometimes create the opposite of what parents want. Instead of building independence, they can unintentionally create dependency.

That doesn’t mean giving money is wrong.

It simply means the purpose behind the gift matters.

Once you understand the purpose, the decision becomes much clearer.

Over the years, I’ve noticed that most thoughtful financial gifts fall into three categories.

1. Timing

Sometimes parents simply want their children to enjoy the money earlier.

Many retirees know they’ll likely leave assets to their children someday. Instead of waiting until inheritance years down the road, they prefer to give some of that money earlier in life.

When kids are in their 30s or 40s, the financial impact of extra money can be significant. It may help them buy a home, invest earlier, or reduce financial stress during busy family years.

There’s also something meaningful about watching your kids benefit from the gift while you’re still around to see it.

Some people call this “giving with a warm hand instead of a cold hand.”

2. Relief

Sometimes money can relieve a specific burden.

Maybe a child is changing careers and needs additional training. Maybe there’s a medical situation that insurance doesn’t fully cover. Maybe they’re dealing with a difficult life transition and just need a little financial breathing room.

In those situations, the goal isn’t simply giving money.

The goal is removing a barrier so your child can move forward.

That’s a very different type of gift than simply writing a check because it’s December and the tax calendar says you can.

3. Experience

The third category is the one I see most often.

Parents want to create experiences with their kids and grandkids.

That might mean taking the entire family on a trip. Renting a large vacation home for a week together. Booking a cruise where everyone can spend time together.

These moments often become some of the most meaningful uses of money in retirement.

You’re not just transferring wealth.

You’re creating memories.

The Tax Rules (Yes, They Matter)

Of course, taxes still play a role.

For 2026, the annual gift tax exclusion allows you to give $19,000 per person per year without triggering any IRS reporting requirements.

But remember: the tax impact often comes before the gift happens.

If the money comes from a traditional IRA withdrawal, that withdrawal is taxable income. If it comes from selling appreciated investments, capital gains taxes may apply.

In other words, giving $57,000 to three kids might require withdrawing significantly more money depending on where those funds come from.

That’s why focusing only on the IRS limit can miss the bigger financial picture.

Share the “Why”

Here’s one final idea I encourage families to consider.

When you give money, share the reason behind it.

Explain why you’re making the gift.

Is it about helping them move forward in life?
Is it about reducing stress during a tough moment?
Is it about creating family memories?

When children understand the meaning behind the money, they’re far more likely to appreciate the intention behind the gift.

And often, that meaning is far more valuable than the dollars themselves.

Start the Conversation Early

If you’re considering helping your kids financially this year, don’t wait until December.

Start the conversation now.

Ask yourself what you’re really trying to accomplish.

Because when giving money aligns with your intentions—not just tax rules—it can strengthen families, create meaningful experiences, and turn financial gifts into something much more valuable.

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About the Author:

Jeremy Keil, CFP^®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retirement Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

Additional Links:

Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
Read Jeremy’s article in Kiplinger magazine: “How to Give Your Kids Cash Gifts Without Triggering IRS Paperwork”
What is the IRS Gift Tax Limit for 2026? – Mr. Retirement YouTube Channel – https://youtu.be/nGeT9SUd3qI
Should You Give Away Your Money in Retirement? – Retire Today Episode 270

Connect With Jeremy Keil:

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Disclosures

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The views and opinions expressed are those of the host and any guest, current as of the date of recording, and may change without notice as market, political or economic conditions evolve. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results.

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