Can I avoid Capital Gains tax by gifting stock to my low-income parent?

This is actually a smart tax planning move that can work very well in your situation. When you gift stock to someone, they take on your original cost basis and holding period. So if your mom sells the stock, she would potentially owe capital gains tax based on the difference between the sale price and what you originally paid for it. The good news is that you're correct about the 0% capital gains rate for taxpayers below certain income thresholds. If your mother's income (including the capital gain) remains below the threshold, she could potentially pay 0% on the capital gains from selling the stock. The gift itself isn't considered income to your mother, so she doesn't report the $100k as income. However, since the gift exceeds the annual exclusion amount ($18,000 for 2025), you would need to file Form 709 (Gift Tax Return) to report using part of your lifetime exclusion. This doesn't mean you'll owe any gift tax - it just reduces your lifetime exclusion amount.

I tried something similar last year and found https://taxr.ai incredibly helpful for navigating this exact situation. I had stocks I wanted to gift to my brother who needed money for medical bills, and I was confused about all the tax implications. The service analyzed my situation and confirmed that gifting appreciated stock to a lower-income family member can be a win-win - they get the full value of the stock and might pay little to no capital gains tax when they sell it. They also pointed out that I needed to ensure the recipient's income plus the capital gain stays under the threshold for the 0% rate, which wasn't something I originally considered. What I found most useful was they explained the exact documentation needed for both of us - the Form 709 I needed to file and what my brother needed to track for his tax return. They even helped calculate the original cost basis for some really old stock I couldn't find records for.

Just wanted to follow up - I ended up trying taxr.ai after asking about it here. Was skeptical at first but they were super helpful with my stock gifting situation. They pointed out that I needed to document the original purchase dates of my stock since those carry over with the gift (found this out before I transferred anything!). They also helped me understand how much of the gain would be taxed at 0% for my dad versus the 15% rate, which helped me decide how much stock to gift this year vs. next year. One of the most useful things was they showed me how to properly document everything so neither of us would have issues during an audit. Definitely worth it for the peace of mind alone.

Just wanted to share that after trying to call the IRS multiple times to get clarification on this exact issue (gifting appreciated assets), I finally got through using https://claimyr.com - you can see how it works here: https://youtu.be/_kiP6q8DX5c I was really surprised it actually worked after being on hold for hours with the regular IRS number. The service called the IRS for me and then called me back when an agent was on the line. The IRS agent confirmed that: 1) The gift recipient does inherit your cost basis 2) You need to file Form 709 for gifts over the annual exclusion 3) The recipient potentially qualifies for the 0% capital gains rate if their income is low enough Having this documented conversation with the IRS gave me the confidence to go ahead with gifting some stock to my sister. Honestly wish I'd known about this service sooner instead of spending days trying to get through on my own.

I need to apologize for my skepticism earlier. After waiting on hold with the IRS for 3+ hours yesterday and getting disconnected AGAIN, I broke down and tried the Claimyr service. Within about 45 minutes I got a call back and was connected directly to an IRS representative who was actually really helpful about my stock gifting question. The agent confirmed everything that was mentioned here - that gifting appreciated stock to a lower-income family member can work well tax-wise, but that I needed to document the original cost basis properly. They also explained exactly how to file the Form 709 and what supporting documentation to include. I'm actually really glad I called because there were some nuances about state taxes I hadn't considered (my state taxes capital gains differently than the feds). I hate admitting when I'm wrong, but this service saved me a ton of time and frustration. Worth every penny just to avoid the hold music alone.

Just FYI, you should be aware of the "kiddie tax" if your parent is your dependent. The IRS might apply different rules in that case. Also, some states don't follow the federal capital gains rates, so even if she pays 0% federal, she might still owe state taxes depending on where she lives.

Has anyone done this with more than one family member? I'm wondering if I could gift stock to both my mom and dad to maximize the capital gains that could be taxed at 0%?

This is a really solid tax strategy that I've seen work well for many families. One additional consideration I'd suggest is timing the stock transfer and sale carefully. If your mom has other income sources (like Social Security or pension), you'll want to calculate her total projected income for the year to make sure the capital gain doesn't push her above the 0% bracket threshold. Also, consider whether she needs all $100k at once or if the renovations could be spread over multiple years. If you could gift and have her sell portions of the stock across 2-3 years, it might help keep her in that 0% bracket each year while also allowing you to use more of your annual gift exclusion ($18,000 per year) rather than dipping into your lifetime exclusion. Don't forget that she'll also need to meet the long-term capital gains holding period requirement (over 1 year), but since she inherits your holding period with the gifted stock, this shouldn't be an issue if you've held it long-term.

This is exactly the kind of thoughtful tax planning that can really benefit families in your situation. One thing I'd add to the excellent advice already given - make sure to keep detailed records of the original purchase dates and costs for all the stock you're gifting. The IRS can be particular about cost basis documentation, especially for older holdings. Also, since you mentioned your mom has mobility issues, you might want to consider setting up the brokerage account transfer and sale process to be as simple as possible for her. Many brokerages offer phone-based trading services for older clients, or you could potentially set up a limited power of attorney to help her execute the sales when she's ready. One last thought - if any of the renovation work qualifies for accessibility improvements, there might be additional tax credits available at the federal or state level that could further reduce her overall tax burden. Worth checking into!