Gadgets and Toys No Longer the Plan for Girls and Boys
I don’t know about you, but trying to figure out out what to gift family members, friends, and children at the holiday’s is like trying to solve a Rubik’s Cube. This year there are two additional factors to consider: inflated prices and the supply chain fiasco. Given these challenges conditions seem ideal to change from giving traditional gifts such as toys, clothes or gadgets. What about giving something which may not be affected by inflation or the supply chain? What could that be? How about gifting money to a 529 saving plan?
The 529 Plan:
A 529, or education saving plan is an investment account which allows you to pay education expenses for a designated person. There are two types of plan. One is the 529 savings plan and the other is the prepaid tuition plan. What makes 529’s a wonderful gift is that there could be tax advantages available for your gift contribution. Now tell me, what other holiday gifts can you give to someone and get a tax deduction? Clothes or gadgets don’t do it!
Making a gift like this for the holidays is simple and easy. You may contribute or gift to an account holder such as your family member or friend, even if you don’t have that person’s details. In the absence of details, you can open a 529 in your name and change the beneficiary from yourself to your gifted recipient later.
Plan, Contributions and Expenses:
Most states and the District of Columbia offer 529 plans. Since most are state administered, each state offers different incentives for their particular plan. You don’t have to open a plan in the state in which reside. For example, you may open a 529 plan where the person plans to attend school and you can open more that one 529 account.
You are probably thinking, you don’t plan to spend that much in gifts this holiday season. You don’t have to! Just spend the same amount you sent last year in 2020. According to Gallop and other polls, the average American spent between $900 and $1,000 in gifts during the 2020 holiday season. You can make a gift contribution for as little as $25 dollars, and there are no annual contribution limits. However, for this year 2021, it’s best to limit your gift contributions to no more than $15,000 per beneficiary. The tax rules outline these limits, and can be very complicated. After all, the plan is called 529 because it’s named after that section of the Internal Revenue Code. Go figure! Let others provide the toys, clothes, and gadget gifts this year and give something more empowering!
Your gift may not only provide you some tax benefits, but could allow the gift recipient to pay for “qualified educational expenses.” What we are really talking about here are expenses such as tuition, computers and related equipment, books and other fees.
In the event you think the benefit is only for someone in college, these expenses cover expenses from K-12 in tuition and even student loan repayments. How about this perspective! After Covid-19, the world, economic strategies, and finances investors are adopting to a new normal. Why not change the types of gifts you give during this holiday season from clothes and gadgets and make 529 saving plan gifts part of your new normal.
Today’s what’s up is about more 401 (K) options. Some companies are now allowing their employees to invest in self directed brokerage accounts in their 401(K) plans. Which simply means you can invest your 401 (K) in much broader stock portfolios and take greater control of your investment and risk. Other 401 (K) providers are allowing their employees to invest 5% of their 401(K) plan funds, into cryptocurrency. Recently, the federal government version of 401 (K) plan, announced that they are going to allow participants, to invest in more than 5,000 mutual funds through a new self directed brokerage account. The take away here is to check with your employer and see what changes, if any, are available to you in your 401 (K) plan and improve your retirement investment income. And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2021. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.