As University of California 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 University of California 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 University of California 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 University of California 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 University of California 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 University of California, 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. University of California 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:
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'Tax Wise Charitable Gifting Tips and Secure Act 2023 Updates.' Jewish Foundation , 2023, www.pajewishendowment.org .
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'Tax-time Charitable Giving Questions.' Rose Community Foundation , 2023, www.rcfdenver.org .
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Accounting Insights Team. 'Maximizing Tax Benefits Through Strategic Charitable Giving.' Accounting Insights , 11 Jan. 2025, www.accountinginsights.org .
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'7 Tax-Smart Charitable Giving Tips Before 2023 Ends.' San Diego Foundation , www.sdfoundation.org .
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'Tax-time Charitable Giving Questions.' Rose Community Foundation , 2023, www.rcfdenver.org .
How does the University of California Retirement Plan (UCRP) define service credit for members, and how does it impact retirement benefits? In what ways can University of California employees potentially enhance their service credit, thereby influencing their retirement income upon leaving the University of California?
Service Credit in UCRP: Service credit is essential in determining retirement eligibility and the amount of retirement benefits for University of California employees. It is based on the period of employment in an eligible position and covered compensation during that time. Employees earn service credit proportionate to their work time, and unused sick leave can convert to additional service credit upon retirement. Employees can enhance their service credit through methods like purchasing service credit for unpaid leaves or sabbatical periods(University of Californi…).
Regarding the contribution limits for the University of California’s defined contribution plans, how do these limits for 2024 compare to previous years, and what implications do they have for current employees of the University of California in their retirement planning strategies? How can understanding these limits lead University of California employees to make more informed decisions about their retirement savings?
Contribution Limits for UC Defined Contribution Plans in 2024: Contribution limits for defined contribution plans, such as the University of California's DC Plan, often adjust yearly due to IRS regulations. Increases in these limits allow employees to maximize their retirement savings. For 2024, employees can compare the current limits with previous years to understand how much they can contribute tax-deferred, potentially increasing their long-term savings and tax advantages(University of Californi…).
What are the eligibility criteria for the various death benefits associated with the University of California Retirement Plan? Specifically, how does being married or in a domestic partnership influence the eligibility of beneficiaries for University of California employees' retirement and survivor benefits?
Eligibility for UCRP Death Benefits: Death benefits under UCRP depend on factors like length of service, eligibility to retire, and marital or domestic partnership status. Being married or in a registered domestic partnership allows a spouse or partner to receive survivor benefits, which might include lifetime income. In some cases, other beneficiaries like children or dependent parents may be eligible(University of Californi…).
In the context of retirement planning for University of California employees, what are the tax implications associated with rolling over benefits from their defined benefit plan to an individual retirement account (IRA)? How do these rules differ depending on whether the employee chooses a direct rollover or receives a distribution first before rolling it over into an IRA?
Tax Implications of Rolling Over UCRP Benefits: Rolling over benefits from UCRP to an IRA can offer tax advantages. A direct rollover avoids immediate taxes, while receiving a distribution first and rolling it into an IRA later may result in withholding and potential penalties. UC employees should consult tax professionals to ensure they follow the IRS rules that suit their financial goals(University of Californi…).
What are the different payment options available to University of California retirees when selecting their retirement income, and how does choosing a contingent annuitant affect their monthly benefit amount? What factors should University of California employees consider when deciding on the best payment option for their individual financial situations?
Retirement Payment Options: UC retirees can choose from various payment options, including a single life annuity or joint life annuity with a contingent annuitant. Selecting a contingent annuitant reduces the retiree's monthly income but provides benefits for another person after their death. Factors like age, life expectancy, and financial needs should guide this decision(University of Californi…).
What steps must University of California employees take to prepare for retirement regarding their defined contribution accounts, and how can they efficiently consolidate their benefits? In what ways does the process of managing multiple accounts influence the overall financial health of employees during their retirement?
Preparation for Retirement: UC employees nearing retirement must evaluate their defined contribution accounts and consider consolidating their benefits for easier management. Properly managing multiple accounts ensures they can maximize their income and minimize fees, thus contributing to their financial health during retirement(University of Californi…).
How do the rules around capital accumulation payments (CAP) impact University of California employees, and what choices do they have regarding their payment structures upon retirement? What considerations might encourage a University of California employee to opt for a lump-sum cashout versus a traditional monthly pension distribution?
Capital Accumulation Payments (CAP): CAP is a supplemental benefit that certain UCRP members receive upon leaving the University. UC employees can choose between a lump sum cashout or a traditional monthly pension. Those considering a lump sum might prefer immediate access to funds, but the traditional option offers ongoing, stable income(University of Californi…)(University of Californi…).
As a University of California employee planning for retirement, what resources are available for understanding and navigating the complexities of the retirement benefits offered? How can University of California employees make use of online platforms or contact university representatives for personalized assistance regarding their retirement plans?
Resources for UC Employees' Retirement Planning: UC offers extensive online resources, such as UCnet and UCRAYS, where employees can manage their retirement plans. Personalized assistance is also available through local benefits offices and the UC Retirement Administration Service Center(University of Californi…).
What unique challenges do University of California employees face with regard to healthcare and retirement planning, particularly in terms of post-retirement health benefits? How do these benefits compare to other state retirement systems, and what should employees of the University of California be aware of when planning for their medical expenses after retirement?
Healthcare and Retirement Planning Challenges: Post-retirement healthcare benefits are crucial for UC employees, especially as healthcare costs rise. UC’s retirement health benefits offer significant support, often more comprehensive than other state systems. However, employees should still prepare for potential gaps and rising costs in their post-retirement planning(University of Californi…).
How can University of California employees initiate contact to learn more about their retirement benefits, and what specific information should they request when reaching out? What methods of communication are recommended for efficient resolution of inquiries related to their retirement plans within the University of California system?
Contacting UC for Retirement Information: UC employees can contact the UC Retirement Administration Service Center for assistance with retirement benefits. It is recommended to request information on service credits, pension benefits, and health benefits. Communication via the UCRAYS platform ensures secure and efficient resolution of inquiries(University of Californi…).
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