Footnotes:
1 The federal income tax deductibility of contributions to a donor-advised fund are subject to certain limitations. These may include but may not be limited to: Donating long-term appreciated securities may be eligible for a federal income tax deduction of the full fair-market value of the asset, up to 30 percent of adjusted gross income (AGI). Donating cash may be eligible for a maximum federal income tax deduction of 60% of AGI. For long-term appreciated gifts of artwork, antiques, books and other tangible personal property, the deductibility rules depend on how the qualifying charity uses the gift. There are additional asset classes and types of contributions which may have additional and/or different limitations. Also, the tax deduction is only available for taxpayers who itemize deductions. Clients should consult with their tax advisor on the income tax implications and tax planning around gifting activity.
2 One thing to keep in mind is that the SECURE 2.0 Act raised the starting required minimum distribution (RMD) age to 73 for individuals born on January 1, 1951, through and including December 31, 1959. As a reminder, ongoing SIMPLE and SEP IRAs (including SAR-SEP IRAS) are not eligible for QCDs. An SEP or SIMPLE IRA is considered ongoing if the employer made a contribution (including a salary reduction contribution to a SAR-SEP or SIMPLE IRA) for the year in which the QDC would be made. If you make a tax deductible IRA contribution after age 70 ½, the amount you can exclude from your taxable income as a QCD generally will be reduced. Work with your Tax Advisor to ensure that you satisfy all the QCD requirements and that QCDs have been correctly reported on your tax return.
3 Qualified higher education expenses generally include expenses required for the enrollment or attendance of the student at any college, university, vocational school, or other eligible postsecondary educational institution. In addition, qualified higher education expenses include tuition expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school, i.e., kindergarten through grade 12, up to a total amount of $10,000 per year from all of the student's qualified tuition plans. Note, however, the state and local tax treatment of 529 plan accounts (including the tax treatment of distributions) may differ from the federal tax treatment. You should consult with and reply on your own independent tax advisor.
4 This assumes that there are no accelerated gifts made by the gift-giver to the same beneficiary during the year of the accelerated gift or the prior four years. Any accelerated gifts made to the same beneficiary in the year of the accelerated gift or in any of the four years prior to an accelerated gift is made may result in a taxable gift. Any gifts made during the year of the accelerated gift or the four years after may also result in a taxable gift.
5 Morgan Stanley, “Morgan Stanley Wealth Management Pulse Survey Reveals Cautious Optimism Despite Short Term Volatility,” Oct. 17, 2024, https://www.morganstanley.com/press-releases/morgan-stanley-wealth-management-pulse-survey1. Note: This wave of the survey was conducted from October 1 to October 14 of 2024 among an online US sample of 990 self-directed investors, investors who fully delegate investment account management to financial professionals, and investors who utilize both.
Disclosures:
The Morgan Stanley Global Impact Funding Trust, Inc. (“MS GIFT, Inc.”) is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. MS Global Impact Funding Trust (“MS GIFT”) is a donor-advised fund. Morgan Stanley Smith Barney LLC provides investment management and administrative services to MS GIFT.
While we believe that MS GIFT provides a valuable philanthropic opportunity, contributions to MS GIFT are not appropriate for everyone. Other forms of charitable giving may be more appropriate depending on a donor’s specific situation. Of critical importance to any person considering making a donation to MS GIFT is the fact that any such donation is an irrevocable contribution. Although donors will have certain rights to make recommendations to MS GIFT as described in the Donor Circular & Disclosure Statement, contributions become the legal property of MS GIFT when donated.
The Donor Circular & Disclosure Statement describes the risks, fees and expenses associated with establishing and maintaining an MS GIFT account. Read it carefully before contributing.
If an account owner or the beneficiary resides in or pays income taxes to a state that offers its own 529 college savings or pre-paid tuition plan (an “In-State Plan”), that state may offer state or local tax benefits. These tax benefits may include deductible contributions, deferral of taxes on earnings and/or tax-free withdrawals. In addition, some states waive or discount fees or offer other benefits for state residents or taxpayers who participate in the In-State Plan. An account owner may be denied any or all state or local tax benefits or expense reductions by investing in another state’s plan (an “Out-of-State Plan”). In addition, an account owner’s state or locality may seek to recover the value of tax benefits (by assessing taxes and/or penalties) should an account owner rollover assets from an In-State Plan to an Out-of-State Plan. While state and local tax consequences or transfer and plan expenses are not the only factors to consider when investing in a 529 Plan, they are important to an account owner’s investment return and should be taken into account when selecting a 529 plan.
Tax laws are complex and are subject to change. This information is based upon current tax rules in effect at the time this was written. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax and legal advice. Individuals should always check with their tax and legal advisor before engaging in any transaction involving 529 Plans, Education Savings Accounts and other tax-advantaged investments or strategies.
Investments in a 529 Plan are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so an individual may lose money. Investors should review a Program Disclosure Statement, which contains more information on investment options, risks factors, fees and expenses and possible tax consequences. Investors should read the Program Disclosure Statement carefully before investing.
The 529 Plan Program Disclosure contains more information on investment options, risk factors, fees and expenses, and potential tax consequences. Investors can obtain a 529 Plan Program Disclosure from their Financial Advisor and should read it carefully before investing.
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CRC #3966270 (10/2024)
