By: Jamie Canup, Partner, Hirschler Fleischer
December 27, 2017
The end of the year is a time when many make last minute contributions to the charity of their choice, in part to get a tax deduction this year on their tax returns. In addition, some make gifts that are just under the gift tax limitation for the year in order to push out assets to their loved ones. And right now a substantial number of 529 Programs are reminding their residents that the time to make a contribution to a 529 account and receive a state tax deduction or credit is soon coming to an end for 2017.
However, while these tax deadlines help to remind us that it’s time to make that gift or contribution, I suspect that what really motivates the majority of donors or contributors is that the gift or contribution they make is the right thing to do. And doesn’t doing the right thing always make you feel better (regardless of the tax consequences). I often tell my clients that while the tax consequences of a particular action or transaction are not unimportant, they should not be the sole reason for that action or transaction – “don’t let the tax tail wag the dog.”
So, Yes, make that contribution to your charity of choice and, Yes, add some dollars to your beneficiary’s 529 account because it’s the right thing to do. If the end of the year and the tax rules regarding a deduction or credit remind you that time is running out, then let the “tax tail” spur you on to do what you ought to do. If that results in a tax benefit to you, even better; or if it only results in taking action now, rather than later, to help your loved one’s higher education dreams come true, that pretty good too.
Every dollar saved today in a 529 plan results in a significant reduction in the amount of debt that student will have when they graduate. Plus studies have shown that children with 529 plans are substantially more likely to continue their education at some form of post-secondary institution. Not only do they benefit from that additional education but all of us benefit when our fellow citizens improve their opportunities for success. Isn’t that more valuable than a tax deduction or credit?! However, if end of year deadlines are the reminder you need to make that contribution, make that contribution NOW before New Year’s Eve (time is running out)!
About the author:
Jamie Canup is Chair of the Tax Practice at the law firm of Hirschler Fleischer based in Richmond, Virginia. He is also an active member of CSPN (and a former Chair of the Corporate Affiliates Advisory Board of CSPN), a frequent speaker at conferences and webinars on issues concerning tax-favored education provisions of the Internal Revenue Code, and has been quoted in The New York Times, USA Today, The Wall Street Journal and other publications on 529 Plans. He can be reached at jcanup@hf-law.com.