Holiday giving is tough enough, even if you’re looking for more or less ordinary presents.

But what if you have something big in mind, such as contributing to a child’s college education fund?

In that case, you need to consider tax issues, and tax rules are always changing.

Fortunately, they got better this year since rates were cut on income, dividends and capital gains. Lots of money can be saved, for example, by moving profitable investments from an adult’s account to a child’s.

So here’s a quick rundown on the key things to keep in mind.

n The limit. You can give an unlimited number of people as much as $11,000 each a year in cash or other assets without triggering a gift tax. That means you and your spouse can give $22,000 to each recipient – $88,000 a year to four grandchildren, for example.

n Estate planning. Parents and grandparents have long given away money and other assets to reduce or eliminate tax on their estates after they die.

The Bush tax cuts adopted in 2001 seemed to make this less of a concern. The estate tax used to apply to all assets over $600,000. That means no tax is due on estate assets below that level.

The exclusion will be $1.5 million in 2004, and it will rise to $3.5 million in 2009. The estate tax will disappear in 2010.

But unless Washington extends the cuts, the exclusion will return to the 2003 level of $1 million in 2011, with a top tax rate of 55 percent on money over that amount.

Given the growing federal budget deficit, Congress could simply let the 2001 cuts expire. And, of course, Democrats could be in power in 2010, and many of them don’t like the estate-tax cut.

n A gift of cash. If your gift is in cash, rather than, say, from transferring stock or mutual fund shares, consider a Coverdell Savings Account, formerly called the Education IRA.

The recipient can get as much as $2,000 a year, from all contributors combined. While there’s no tax deduction on the contribution, withdrawals, including investment gains, will be tax-free so long as they are used to pay qualified expenses for primary or secondary education, or college.

Note, however, that to make a full $2,000 contribution a married couple that files a joint tax return can have a modified adjusted gross income no higher than $190,000, and a single person no more than $95,000. (Basically, this is the adjusted gross income figure found on your tax return.)

Any broker or fund company can tell you the fine points of seting up a Coverdell. These accounts are especially appealing because you can invest in just about any security you like.

n Section 529 Plans. These are used for college but not primary and secondary education. There’s no deduction for contributions, and withdrawals spent on college are tax-free.

Most important: Unlike the Coverdell, there’s no income limit, so anyone can contribute. And you can put in the full $11,000 per person per year, or more if you don’t care about gift tax. In fact, you can make five years’ contributions – $55,000 – in one year and still be free of gift tax.

These plans are sponsored by the states, though many plans are open to nonresidents.

Bookstores and libraries have plenty of books on 529 plans and other college savings strategies. One of the newest is the “Standard & Poor’s Guide to Saving and Investing for College,” by David J. Braverman. The classic book is “The Best Way to Save for College” by Joseph Hurley. Order it at his Web site, http://www.savingforcollege.com, or call 1-800-400-9113.

-Income shifting. This is the pros’ term for transferring taxable investments to family members who are in lower tax brackets, such as your children or grandchildren. The tax law adopted this year makes this especially appealing if the recipients are 14 or older.

That’s because these children are taxed at their own brackets, which are usually a lot lower than the parents’ rates that generally apply to younger kids.

While the parents may be in the maximum 35 percent income tax bracket, their children may be in the 10 percent bracket. Similarly, the parents are likely to pay 15 percent on capital gains and dividends, but a child may pay only 5 percent.

Capital gains tax is on the difference between the sales price and the purchase price. When the child sells an investment received as a gift, the giver’s original purchase price is used to figure the tax bill.

Thus, it can really pay to shift stocks, bonds or funds that have grown in value to custodial accounts opened for the children. With these, there’s no restriction on when the money can be withdrawn or how it can be used, as there is with the Coverdell and 529 plans.

Keep in mind, though, that these gifts cannot be taken back. The child will have complete access upon turning 18 or 21, depending on the state.

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(Jeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownjphillynews.com.)

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(c) 2003, The Philadelphia Inquirer.

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AP-NY-12-15-03 0624EST