Dexter’s downtown Edward Jones Financial Adviser, Mike Fitzpatrick, passes along some pointers to help guide us in our holiday giving.
You probably already know about the two big shopping days – Black Friday and Cyber Monday – that follow Thanksgiving. But did you know that Giving Tuesday is observed on Nov. 28? By showing your generosity on this day and throughout the holiday season, you can benefit charitable organizations and your loved ones – and your gifts can even provide you with some potential financial advantages.
So, what sort of gifts should you consider? Here are a couple of suggestions for the charitable organizations you support:
Give cash. Any charitable group will welcome cash contributions. And if the charity has 501(c)(3) status (named after the section of the Internal Revenue Code that governs such groups), your gift can offer you a tax deduction. So, for example, if you are in the 25 percent tax bracket and you give $1,000 to a qualified charity, you will be able to deduct $250 from your taxes. (You will need to itemize deductions to gain this tax benefit.) Generally speaking, your maximum deduction is limited to 50 percent of your adjusted gross income.
You might be able expand the reach of your cash gifts through your workplace. Some companies will match some of your contributions to charitable organizations. Also, your employer may allow you to apply for larger grants to support nonprofit groups, especially those in which many employees are actively involved.
Donate appreciated stocks. If you have stocks that have grown significantly in value, you may want to donate them to a charitable group. You will be allowed a charitable deduction for the full fair market value of the gift on the date of the transfer, even if your original cost was only a fraction of today’s value. Furthermore, you will avoid the capital gains taxes you’d have to pay if you sold the stock, provided you’ve held the stock for at least a year.
You don’t have to restrict your giving to charitable groups. If you have children or grandchildren, you might want to provide them with the gift of higher education by contributing to a 529 college savings plan.
A 529 plan offers several benefits. Contribution limits vary from state to state, but are generally quite high – you can accumulate more than $200,000 per beneficiary in many state plans, although special gifting provisions may apply. And you can typically invest in the 529 plan offered by any state, even if you don’t live there, although you might not receive the tax benefits – such as deductions or tax credits – you’d get if you invested in your own state’s plan.
Also, all withdrawals from 529 plans are free from federal income taxes, and possibly from state income taxes, as long as the money is used for a qualified college or graduate expense of the beneficiary you’ve named – typically, your child or grandchild. (Withdrawals for expenses other than qualified education expenditures may be subject to federal, state and penalty taxes.) Be aware, though, that 529 plans may affect financial aid, particularly if you’ve set up a plan for your grandchild, so you might want to consult with a college’s financial aid office before the child heads off to school.
Through your gifts to charitable groups and your family members, you can take the spirit of Giving Day and extend it throughout the holiday season – and even beyond.
For further discussion you can reach Mike at his Edward Jones office in downtown Dexter or give him a call at 734 426 5198.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.