Deductive ThinkingMaybe you're taking an exploratory peak at your income tax return and trying to see whether all those fiscal cliff shenanigans really ended up saving or costing you money. Either way, I suspect you could use another deduction.
I'll start with the premise that many of us spend a considerable amount of time working for the charitable and non-profit organizations that make living around here a special thing. We write them our checks, which we routinely report on Schedule A, but we probably also make significant donations of our goods and services that are also worth toting up. That is, if we drove in furtherance of the organization's work, we can deduct $.14 per mile for those trips (if we can reconstruct exactly when and where we went, of course). If we donated something to one of their auctions (wine, tickets, artwork), we can deduct its fair market value (but we need something to establish that - most organizations provide that verification). Even if we donated flowers or decorating materials or refreshments for, say, the Peterborough Players spectacular auction (one of the area's great annual events!), we can write off the cost of those if we kept our records. Unfortunately, although our time is always the most valuable contribution we make, the IRS assumes we'd fudge those figures, so they just say, no dice, whether we can prove all those hours or not. If the deductible amounts add up to less than $500, we don't need to file anything extra to claim the deductions - just keep our records in case someone at the IRS doesn't have enough to do. If we want to claim more than that - maybe you gave public radio your VW bus with the peace sign - we can certainly do it, but there are other forms to file and appraisals or certifications of value to get. Check the instructions for the details. The point, though, is that we shouldn't quit doing our good deeds for all those organizations that count on us, but we don't need to shoot ourselves in the foot either. It won't cost the organizations anything for us to claim the in-kind deductions we're entitled to, and that will leave us with more to give them in cash! Posted 02/22/2013 A Unique IdeaI've mentioned a number of times that we can all make annual gifts to our family members without incurring any gift tax consequences, if we restrict our generosity to the exclusion limit. That's been $13,000 per person per year for several years now, but the new tax law kicks that figure up to $14,000. OK, maybe that's beyond the reach of some folks, so how about this: We can also pay school tuition for our children and grandchildren in any amount without incurring gift tax penalties. So if your progeny have gotten themselves accepted at prestigious institutions of higher learning, or, say, at Mountain Shadows or Dublin School, to name a couple of prestigious local learning emporiums, you can pay the kids' tuition there (or any portion thereof), without tax consequences, as long as you send the checks directly to the registrar's office. That last part is critical.
But what if your tykes don't have current tuition obligations, and you know you're not going to be able to write five figure tuition checks when the college bills start coming due? Consider setting up a so-called "529 College Savings Plan" for each of the budding Einsteins. You can make it happen for as little as $15 per month per child - and you can set it up to have an automatic deduction made from your account to fund each plan. Think of it like an education Christmas Club if you're old enough to remember those, but it's even better because the funds grow tax-free, and there's likely to be no tax due even when the cash is ultimately paid out to defray those tuitions. Fidelity Investments administers these plans in New Hampshire under the name "The UNIQUE College Investing Plan", but you can also survey the offerings of other states and participate in their plans if you prefer what you see there. You can even switch an account to another child if the original beneficiary decides on the school of hard knocks instead of someplace with ivy all over it. My personal testimonial is that I've got 4 brilliant and adorable grandkids who aren't yet ready to apply for early decision, but will now have something toward their mind-numbing tuition bills when the time comes. And the fact that the plan contributions disappear from my account in modest monthly tidbits keeps those bites from drawing blood. There are lots of rules I can't describe here, but you can easily work through them if you're motivated to make a difference for your offspring. I suggest you either Google "529 Plans" or go directly to www.fidelity.com/unique or try 1-800-544-1914. Your little students will appreciate the effort someday, and you'll get a warm and fuzzy feeling every month when the statement arrives to confirm your investment in their future. Posted 02/08/2013 |
Phil RunyonPhil Runyon has been practicing law in Peterborough, NH, for over 50 years. He has regularly sent out emails to his clients, keeping them updated on changes in the law that effect estate planning, and writing about other relevant concepts or planning techniques. Archives
February 2026
Categories
All
|