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October 9, 2026 · Wendland Services Weekly · Issue four

Wendland Services Weekly — issue four: year-end gifts and household payroll

Welcome back to the weekly briefing. This issue covers year-end family gifts, household payroll, and a new scholarship credit that begins in 2027. You can sign up at wendlandservices.com/insights to get each issue by email.

Issue one covered the permanent estate exclusion, issue two the fourth-quarter deadlines, and issue three small business stock. This week turns to the gifts and payroll that close out a household's year.

1. Annual exclusion gifts: the calendar decides

For 2026, the first nineteen thousand dollars of present-interest gifts to any one person is excluded from taxable gifts, and the exclusion for gifts to a spouse who is not a United States citizen is one hundred ninety-four thousand dollars. Unused exclusions do not carry forward. Married couples can elect to split gifts, which treats each gift to a third party as made one half by each spouse and allows thirty-eight thousand dollars per recipient, but the election requires a Form 709 even when no tax is due. The Internal Revenue Service treats a check gift as complete when the recipient deposits or presents it, if delivery was unconditional, the bank pays it when first presented, and the donor is alive at payment. A check deposited in January is a 2027 gift.

2. Tuition, medical bills, and 529 plans

Tuition paid directly to a school and payments made directly to a medical provider are not gifts at all, so they sit on top of the annual exclusion with no dollar limit. The money must go to the institution or provider, not the student or patient. A contribution to a 529 plan, by contrast, is a gift that uses the annual exclusion. A donor can elect to spread a contribution of up to five times the annual exclusion, ninety-five thousand dollars in 2026, evenly over five years, or one hundred ninety thousand dollars for a couple splitting gifts. The election is made on Form 709. Starting in 2026, 529 plans can pay up to twenty thousand dollars a year per beneficiary of elementary and secondary school expenses, up from ten thousand dollars, covering tuition, books, curriculum materials, and certain tutoring.

3. Household payroll: nannies, housekeepers, and estate staff

A household employer who pays one worker three thousand dollars or more in cash wages in 2026 must withhold and pay Social Security and Medicare taxes, a combined fifteen point three percent split evenly between employer and employee. Social Security tax applies to the first one hundred eighty-four thousand five hundred dollars of 2026 wages, Medicare tax has no cap, and an additional nine-tenths of one percent of Medicare tax must be withheld from wages above two hundred thousand dollars. Paying one thousand dollars or more in total cash wages in any calendar quarter of 2025 or 2026 also triggers federal unemployment tax of six percent on the first seven thousand dollars of each worker's wages, before credit for state unemployment tax. Forms W-2 go to employees, and Copy A with Form W-3 to the Social Security Administration, by February 1, 2027. The taxes are reported on Schedule H with the 2026 Form 1040, so households should cover them through withholding or estimated payments to avoid an underpayment penalty. State rules apply separately.

4. A new scholarship credit begins in 2027

On October 1, 2026, the Treasury Department and the Internal Revenue Service proposed regulations for the new Section 25F credit for cash gifts to scholarship granting organizations. Beginning January 1, 2027, an individual can claim a nonrefundable credit of up to one thousand seven hundred dollars, or three thousand four hundred dollars for a married couple filing jointly. A gift that earns the credit cannot also be deducted as a charitable contribution, and any state credit for the same gift reduces it. The organization must be listed by a participating state, though donors anywhere can give. Because the credit applies only to 2027 contributions, these gifts belong in next year's plan, not this December's.

5. Still waiting on the 2027 numbers

The Internal Revenue Service had not released its 2027 inflation adjustments for brackets, the estate exclusion, and the annual gift exclusion when this issue was prepared, and the Social Security Administration had not announced the 2027 wage base. Private projections are circulating, but none are official. Until the final figures are published, 2026 gifts should be sized to the 2026 amounts above.

Calendar watch

If any of this touches your household, your trusts, or your family office, a second look before year end can be worthwhile. You are welcome to write to marcel@wendlandservices.com.

Wendland Services is an independent practice in Bellmore, New York, focused on accounting, bookkeeping, tax, and consulting for high-net-worth households and family offices.

This note is educational, not advice for your facts, and not an offer of legal services.

— Wendland Services marcel@wendlandservices.com