Dow Incorporated Employees: Year-End Idea #5: Charitable Giving

As Dow Incorporated employees prepare to give at the end of the year, they should 'plan ahead to maximize the impact of your donations,' says Michael Corgiat of The Retirement Group at Wealth Enhancement Group. Knowing how to maximize tax benefits and timing your giving can help you maximize your giving to charities.

The Retirement Group, a division of Wealth Enhancement Group, recommends that Dow Incorporated employees and retirees incorporate charitable giving into overall financial planning to help them meet their long-term financial goals. This approach supports worthy causes while optimizing possible tax advantages of such generosity.

In this article, we will discuss:

1. We pause to give thanks for our bounties and the people in our lives as the holiday season and the end of the year approach.
2.This also is a time when charities are often thought of. These tax benefits may make you want to donate more.
3. We recommend all able-bodied Dow Incorporated employees and retirees do this in their year-end tax planning.

A new study from Fidelity Charitable found that 60% of people over age 65 said they will give to charity in retirement, on average giving away USD 6,500 a year. That would suggest that charitable giving may be an important consideration for people approaching retirement age and could be a meaningful way to give back to causes they care about.

No tax deduction for charitable gifts.

Donations generally are deductible if you itemize deductions on your federal income tax return. This may help you increase your donation as well.

Example(s): Assume you want to make USD 1,000 in charitable donations. A possible way to potentially increase the value of the gift is to add the amount of any income taxes saved through the charitable deduction. You might give USD 1,316 to charity at a 24% tax rate [USD 1,000 (1 - 24%) = USD 1,316]. [USD 1,316 x 24% = USD 316 in tax savings]. Alternatively, you could donate USD 1,471 at a 32% tax rate to charity [USD 1,000 (1 - 32%) = USD 1,471; USD 1,471 x 32% = USD 471 in taxes saved].

Yet Dow Incorporated employees and retirees should be aware that their deduction may be limited to a certain percentage of AGI. You can, for example, deduct 60% of your AGI for the year on cash gifts to public charities versus 30% or 20% for other gifts to charity. Generally speaking, charitable deductions in excess of the AGI limitations can be carried forward and deducted over the following five years subject to income percentage limitations for those years.

For 2022 charitable donations, the normal rules apply: Direct cash donations to public charities may not exceed 60% AGI. You can take a USD 400 charitable deduction for direct cash donations to public charities from 2021 even if you do not itemize deductions.

Document your charitable donation properly. Any contribution of cash, a check, or other monetary gifts that you make must be recorded as either a bank record (such as a canceled check, a bank or credit union statement, or a credit card statement) or a written communication (such as a receipt or letter) from the charity giving its name, date, and amount. Any deduction you claim for a USD 250 or more charitable contribution must be accompanied by a contemporaneous written acknowledgment from the charity. You face additional requirements if you make non-cash contributions.

Year-end tax planning Employees and retirees of Dow Incorporated should plan for such charitable contributions when making year-end tax contributions. The timetable of your income and expenses usually has some bearing on you. Generally speaking, you should time recognition of your income so it is taxed at the lowest rate and recognition of your deductible expenses so they can be claimed in years when you are in the higher tax bracket.

If you expect to be in a higher tax bracket the following year, for example, delay making the charitable contribution until January so you can claim the deduction the following year when you will be able to take the larger tax benefit. Or you could roll the charitable contribution and other deductions over to a year where your itemized deductions are greater than the standard deduction. And if those income percentage limits apply to you in a given year, you may wish to move income into that year or move deductions out of that year to allow a larger charitable deduction for that year. A tax expert can evaluate your individual tax situation.

A word of caution For employees and retirees of Dow Incorporated, stick with reputable charities and avoid ones with similar names. Fraudsters often imitate charities on phony websites, emails, phone calls, social media, and in person solicitations. Search for the charity through the Tax-Exempt Organization Search tool at irs.gov. Don't send cash; instead, use a check or credit card.

It's like planting a tree with charitable giving. As a tree grows over time, so can your charitable donations. Benefits from charitable giving can be seen immediately in the recipient organization as well as in the long-term benefits of continued support. As a tree provides shade, clean air, and space for wildlife, charitable giving may help those in need as well as the community in general. Like a tree, your charitable contributions can also flourish long after you make them - and provide a legacy for future generations.

Added Fact:

The research shows that charitable giving benefits both the recipients and the donors as well—especially in their 60s. A study in Psychology and Aging in November 2022 reported lower stress, higher life satisfaction, and better health among older adults who regularly gave. Giving back and making a difference in others' lives can provide meaning and fulfillment in retirement.

Added Analogy:

Charitable giving is like planting bulbs in the fall in a garden. Dow Incorporated workers are like gardeners who have harvested plenty during their careers. Like these experienced gardeners who choose and plant bulbs which will bloom in the spring, retirees can choose charities and organizations to support. With every charitable donation comes hope in initiatives and programs that will change things for the better. Just as the gardener's work produces flowers, retirees' charitable gifts make an impact on others and last a lifetime. Remember that like a well-tended garden, charitable giving takes planning, tending, and joy in seeing the results grow.

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Sources:

'Tax Wise Charitable Gifting Tips and Secure Act 2023 Updates.' Jewish Foundation , 2023, www.pajewishendowment.org .
'Tax-time Charitable Giving Questions.' Rose Community Foundation , 2023, www.rcfdenver.org .
Accounting Insights Team. 'Maximizing Tax Benefits Through Strategic Charitable Giving.' Accounting Insights , 11 Jan. 2025, www.accountinginsights.org .
'7 Tax-Smart Charitable Giving Tips Before 2023 Ends.' San Diego Foundation , www.sdfoundation.org .
'Tax-time Charitable Giving Questions.' Rose Community Foundation , 2023, www.rcfdenver.org .

How does The Dow Chemical Companyâ€™s pension plan structure impact an employee's retirement benefits when considering different retirement ages? The Dow Chemical Company offers various options in its pension plan, and understanding these can significantly affect financial planning for retirement. An employee must weigh the benefits of retiring earlier with potentially lower monthly payments against the advantages of working longer and how this aligns with personal retirement goals and expectations.

The Dow Chemical Company’s pension plan and retirement ages: The Dow Chemical Company’s pension plan structure impacts employees' retirement benefits based on their retirement age. Retiring earlier results in lower monthly payments due to reduced service time and potential early commencement penalties, while working longer allows for more service accrual and higher monthly benefits. Employees must evaluate how these factors align with personal retirement goals, as choosing to retire early might not provide as much financial security as delaying retirement(The Dow Chemical Compan…).

What are the implications of the 20% mandatory withholding tax on lump-sum distributions from The Dow Chemical Company's pension plan, and how does the option to roll over affect an employeeâ€™s tax situation? Employees taking lump-sum distributions need to be cautious about this withholding rule as it can impact their immediate financial needs. Additionally, the rollover option provides a strategy to defer taxes, which can be crucial for long-term financial health. Employees should consider how to best utilize these rules in their personal financial planning.

20% mandatory withholding tax on lump-sum distributions: Lump-sum distributions from The Dow Chemical Company’s pension plan are subject to a 20% mandatory withholding tax if not directly rolled over into another qualified retirement plan. This tax can significantly impact an employee's immediate finances. However, opting to roll over the lump sum to a qualified plan defers taxation until funds are withdrawn, allowing employees to manage their tax liabilities better while continuing to grow their retirement savings(The Dow Chemical Compan…).

How does The Dow Chemical Company ensure that employees understand their eligibility for retirement benefits based on various service and age criteria? Eligibility considerations based on service years and age can significantly influence the retirement timeline for employees. Moreover, itâ€™s essential for employees to be well-informed about these factors to make educated decisions pertaining to their retirement and whether adjustments to their career plans are needed for maximizing benefits.

Eligibility for retirement benefits: The Dow Chemical Company outlines eligibility for pension benefits based on a combination of service years and age. Typically, employees become vested after three years of service or upon reaching age 65 while still employed. The company ensures that employees are informed about these eligibility criteria through various resources, such as the Dow Benefits Service Center, enabling them to make informed retirement decisions(The Dow Chemical Compan…).

In what ways can employees of The Dow Chemical Company appeal decisions regarding their pension benefits, and what processes are in place to facilitate these appeals? The appeal process is critical for employees who might feel that their benefits have not been administered correctly. Understanding the correct procedures and having access to the right resources can empower employees to effectively advocate for themselves in the face of administrative decisions.

Appealing pension benefit decisions: If employees believe there has been an error in the administration of their pension benefits, The Dow Chemical Company provides a formal appeal process. Employees can file a claim, and if denied, they have the right to appeal the decision. The Retirement Board oversees these appeals, and employees must follow the outlined procedures for their appeal to be considered(The Dow Chemical Compan…).

What strategies can employees of The Dow Chemical Company employ to maximize their pension benefits while transitioning to retirement? Employees must navigate complexities such as contribution limits, benefit formulas, and personal retirement savings. A strategic approach, which includes understanding the timing of retirement and how it interacts with pension claims, can lead to more favorable financial outcomes in their retirement years.

Maximizing pension benefits: Employees at The Dow Chemical Company can maximize their pension benefits by carefully planning their retirement timing. Key strategies include working longer to accrue more service years, reviewing contribution limits, and understanding the benefit formula used. Aligning personal savings and pension claims with the optimal retirement age can result in more favorable financial outcomes(The Dow Chemical Compan…).

How can retirees from The Dow Chemical Company navigate survivor benefits, and what are the eligibility criteria for spouses or domestic partners? Survivor benefits are an essential aspect of retirement planning, especially for employees concerned about providing for their loved ones after death. Itâ€™s vital for employees to understand both eligibility and what benefits their partners might receive, fostering peace of mind during retirement planning endeavors.

Survivor benefits for retirees: Retirees from The Dow Chemical Company can opt for survivor benefits to provide financial security for their spouses or domestic partners. Eligibility for these benefits depends on the plan's structure, and employees should understand the options available to ensure their loved ones are covered after their death. These benefits include continued monthly payments or lump-sum options depending on the election made at retirement(The Dow Chemical Compan…).

How does The Dow Chemical Companyâ€™s defined benefit pension plan differ from other retirement plans, and what should employees know when comparing their options? Employees need to understand the distinctions between defined benefit plans and other types such as defined contribution plans for effective retirement planning. This understanding will help them better appreciate the benefits and risks associated with their choices and aid with decision-making processes.

Comparing defined benefit pension plan: The Dow Chemical Company offers a defined benefit pension plan, which differs from defined contribution plans like 401(k)s. In a defined benefit plan, the company guarantees a specific monthly benefit upon retirement, typically based on years of service and salary, whereas defined contribution plans depend on employee contributions and investment performance(The Dow Chemical Compan…).

What resources does The Dow Chemical Company provide to employees seeking detailed information about their retirement options, and how can they effectively utilize these? Accessing the right resources can bridge knowledge gaps regarding pension plans. Employees should know about dedicated pathways to assistance, such as benefit service centers and consultation avenues, to fully leverage their benefits package.

Resources for retirement information: The Dow Chemical Company provides several resources for employees to access detailed information about their retirement options. The Dow Benefits Service Center and My HR Connection are key tools where employees can request pension estimates, understand payment options, and clarify eligibility criteria. These resources help employees make informed decisions regarding their retirement planning(The Dow Chemical Compan…).

With changes in IRS rules becoming increasingly relevant, how do employees of The Dow Chemical Company stay informed about updates that may impact their retirement savings? Employees need to be active participants in their retirement planning by staying abreast of legal and regulatory changes that can influence their financial strategies. Having a clear understanding of these regulations can help ensure compliance while maximizing possible financial benefits under updated laws.

Staying informed about IRS rules: Employees of The Dow Chemical Company must stay informed about IRS rules that may affect their retirement savings. Changes in tax laws, contribution limits, or distribution rules can significantly impact financial planning. The company provides updates and resources to ensure employees are aware of relevant regulatory changes that might affect their retirement strategies(The Dow Chemical Compan…).

How can employees of The Dow Chemical Company reach the benefits service center for additional inquiries regarding their pension plan, and what information should they prepare beforehand? Knowing how to contact the benefits service center is crucial for employees seeking clarity on their pension plan benefits. Preparing relevant information ahead of time can streamline the process, allowing for a more productive engagement with benefits specialists and ensuring that employees receive precise guidance tailored to their situations.

Contacting the benefits service center: Employees seeking clarification about their pension benefits can reach the Dow Benefits Service Center via phone or online through the Message Center. It is recommended to have personal identification and details of the pension plan ready to streamline the inquiry process. Proper preparation ensures a productive conversation with benefits specialists(The Dow Chemical Compan…).