Want to help your kids and grandkids in ways that provide the greatest benefit from federal tax laws? Here are some tips:

1. The annual gift tax exclusion for each person-to-person gift is $13,000. That means you and your spouse can each give your son and daughter-in-law $13,000 each per year, for a total of $52,000 a year, before hitting the gift tax limit.
2. If you’re paying for a grandchild’s college, send the check directly to the school so it won’t count against the annual gift exclusion. If the parents earn less than $160,000 ($80,000 for single filers), they can qualify for the new $2,500 American Opportunity Credit, a tax credit for educational expenses. In that case, it might make more sense to give them the money and let them pay the bill.
3. Gifts to cover medical bills follow the same rules as those for education expenses. If you pay the doctor or hospital directly, it won’t count against your annual or lifetime gift limit.
4. If you have a winning investment, it may be beneficial to give your kids or grandkids shares to sell. Because of changes in the kiddie-tax rules, this strategy works best for young adults over the age of 19 (or over the age of 24 if they’re full-time students). If they earn under $33,950 ($67,900 for joint filers), including the gain on the sale of that security, they could qualify for the zero percent capital gains tax rate in effect in 2009.
5. With today’s stricter lending standards, giving money for a down payment may not help young homebuyers qualify for a loan. Instead, issue the mortgage yourself, suggests Maureen McGetrick, a tax partner with BDO Seidman, a New York accounting firm. If you charge at least the market rate of interest—roughly 4.5 percent today—and structure the loan as a real mortgage, your kids can still write off their mortgage interest. You can give them a break on closing costs. Plus, you’ll keep the money in the family, and earn a bank-beating rate of return yourself.

Linda Stern writes on taxes for the AARP Bulletin.