Tax Reduction Podcast

Episode 13. Double Dip Charitable Tax Deductions Before Year End

• Boris Musheyev, CPA • Episode 13

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Are you looking to maximize your charitable contributions and gain significant tax benefits before the year ends and going forward? Look no further! In this episode, we uncover a powerful tax strategy involving appreciated stocks. Learn how donating stocks held for over 12 months can let you 'double dip' into tax deductions, allowing you not only to avoid reporting income from the stock's gain but also to claim a charitable tax deduction. We'll guide you through the nuances of this strategy, ensuring you leverage these benefits to their fullest.

🔍 What You'll Learn:

  •  Appreciated Stock Donations:

Get an in-depth understanding of how donating appreciated stocks can lead to substantial tax benefits.

  •  Avoid Capital Gains:

Learn how you can bypass the need to report income from the gains of your appreciated stocks.

  • Charitable Tax Deductions:

Explore how to claim a tax deduction for the full market value of the donated stock.

  • Strategic Timing:

Understand the importance of timing in maximizing your tax benefits before the year-end and going forward!

I've put together this FREE resource for you:

7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/

Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/

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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...

Speaker 1:

If you donate an appreciated stock that you own for more than 12 months, irs allows you to double dip into your charitable tax deduction. You basically don't get to report any income from the gain of that stock and you get a tax deduction. I will walk you through intricacies and a tax strategy of exactly how to do this so that you get a double dip in your charitable donation tax deduction right before year-end. Ready, let's go.

Speaker 2:

Welcome to the tax reduction podcast for money-making entrepreneurs with Boris Mousheev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in depth and easy to understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.

Speaker 1:

Okay, awesome, charitable donations and how they work and how can you double dip by donating appreciated stock. Before we get into details of the tax strategy how, first of all, charitable donations work and how you as a business owner or an individual really can maximize on it and can you really take your charitable donations let's first figure out that before we talk about how to donate an appreciated stock. Now, on your taxes, there's two types of deductions. Okay, there is something that's called a standard deduction and there's something that's called an itemized deduction. Now, standard deduction means IRS gives you a free gift. It's a deduction. Irs says, hey, take this deduction and go home.

Speaker 1:

Now, if you're married individual, for 2023 taxes, your standard deduction is $27,700. What does that mean? Let's just say you and your spouse make $100,000. You get to the deduct $27,700 from your taxes and only pay taxes on $72,300. Okay, is that clear? $100,000 minus $27,700. $72,000, done deal. Okay, now that is called standard deduction.

Speaker 1:

Then there is something that's called an itemized deduction. We're also a charitable donations comments to play. Now, same example $100,000. But now you get to itemize your deductions. You get to tell IRS hey, instead of taking a standard deduction, what you give me, I want to itemize it. I've got my own expenses. The biggest expenses on the itemized schedule is usually mortgage interest, your state taxes and your donations. Okay, so same example. Let's assume mortgage interest is $15,000. Your state taxes is $10,000. And your donations are $7,000. Okay, your total deduction is $32,000, which is higher, $32,000 or $27,000. Obviously $32,000. So you tell the IRS hey, I want to take the itemized deduction instead. And bam, your new taxable income is $68,000. Now pay attention, if it wasn't for your donations of $7,000, your deductions between mortgage interest and state taxes would only be $25,000. Irs says that's not enough, we'll give you a higher deduction. But now you're strategically making donations to get a higher deduction if you have causes that you want to support. So that is really how standard and itemized deductions work.

Speaker 1:

And the reason I wanted to explain this to you is because a lot of people think, hey, I'm going to donate money and I'm going to get a tax deduction for it right away. That's not always true. You've got to take a look. Are you in a standard deduction area or are you in itemized deduction area? And most of the time, if you're a business owner and you've profits in your business I know a lot of business owners that own homes. Right, they own their home, so they have a mortgage interest, they have a property taxes, they pay a lot of state taxes, so in most of them, do itemize, so donations do help them.

Speaker 1:

For those people that don't itemize and don't give a lot of donations, this may not even help. Or you can strategize in a way like hey, I know that you know my mortgage interest and taxes is 25,000. If I'll start donating, I'll be getting tax deduction. Sometimes that's even an incentive for people to donate. So just know this tax strategy. Always speak to your advisor about it, right, tax advisor? Now let's jump into this section right here about donating an appreciated stock, how this works, and then we also going to cover the tax strategy about it. So you're all prepared before you end, right after this race.

Speaker 2:

If you have a tax preparer and you do not have a tax advisor, the only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Boris put together a free PDF for you, the business owner seven tax write offs every S corporation business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.

Speaker 1:

All right, welcome back. Let's talk about appreciated stock. So we have this code in the IRS the rule that if you have a stock right that you own for more than 12 months, that now makes it a long term stock. That means you've held onto it for long term. When it's more than 12 months Now that means that when you donate this stock, irs says if you donated directly to charity, like without selling your stock, you just take the stock, you assign your brokerage account, you call your brokerage account and assign it to a charitable organization of your choice. The entire value, the fair market value today that is in the stock market, is tax deductible to you. And you're like okay, boris, well, it would be tax deductible to me anyways if I sold the stock. Not necessarily. Okay, let's go through an example over here. Let's assume you bought a stock for $10,000, some money to invest. You bought it for $10,000. Couple of years later your stock has appreciated to $40,000. So you usually donate to a charitable organization. Let's assume $30,000. So you're like hey, I want to donate money to a charitable organization, or there's a cost that you really believe in and you want to donate. So let's assume you sold your stock and you made $30,000 capital gains. All right, that's $30,000. And you're going to donate the entire $40,000, because you really received cash of $40,000, out of which gain is 30. Your benefit is only $10,000. That is your write off. Okay, because you had to recognize a $30,000 income. You had to recognize an income first and then you donated it. So, on your taxes, the way you're going to receive your tax forms is that there's going to be an income and then minus the deductions. So in this case, you're reporting an income. Now, what can you do? To strategically do this is, instead of cashing out on that stock, you can just donate the stock and write off the fair market value. Now, the stock has to be long term and you have to donate it directly to charity. You're not going to report any capital gains. Let's talk about this example again. Okay, let's talk about this example again. Now, over here, if you're going to donate $40,000 and appreciate its stock to the charity of your choice, well, what's going to happen is that you're not going to pick up an income of $30,000. Instead, you're just going to get a direct write off of $40,000. Okay, so think about it. That's an income that you never had to write off $40,000.

Speaker 1:

If you really take another example, you made $40,000 in your business. You gave $40,000 to the IRS, so you don't have to pay tax on the $40,000 that you actually earned. In this case, you put the money into the stock market. The stock market made you money and you usually give to charity. So instead of giving you cash that you earned from the business, you can just donate appreciated stock, because now you do not have to pick up that appreciate the capital gains income and the entire $40,000 will be a write off to you. That is, ladies and gentlemen, is double dipping into it. So, before year end, if you have any appreciated stocks and you usually are giving person you've got charitable organizations and charitable causes that you believe in that you want to give to. This would be an amazing tax strategy for you to use. Now I'll put in a little bit bonus over here, which is donor advice fund, and some of you may actually find this super helpful. So we're going to talk about it right after this break.

Speaker 2:

If all your accountant does is taxes, you may be overpaying in taxes by thousands of dollars every year. Every week, Boris releases a tax strategy on his podcast so that you, the business owner, can pay less in taxes every single year. Be sure to subscribe to our podcast to be notified when a new tax strategy is released. If you're ready to work with a tax advisor on your tax strategy and planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. Again, that's wwwtaxplanningcallcom.

Speaker 1:

Okay, awesome, welcome back. So we talked about how to donate an appreciated stock and get a hundred percent right off for the fair market value. Now, again, the appreciated stock is something that you help for long term more than 12 months. Okay, now there is another strategy that you can use, which is called donor advice fund. The donor advice fund is basically an account that you get to open and the money in that account will be used for charitable donations in the future. So let's say you've got $200,000 sitting in a bank account, profitable business owner, using all types of tax strategies, and you're also giving and have charitable causes, but you haven't decided which charitable cause you want to give the money to, and the year end is approaching.

Speaker 1:

Can you prepare your charitable causes? The answer is yes, all right, you open up what's called a donor advice fund. You can really open up with any financial well, not any, but there are financial institutions that specialize in it. You put the money into the donor advice fund and, guess what? You get a tax deduction for your charitable donations in this year, even though you haven't picked an organization or a charitable cause that you want to donate the money to. As long as you've put the money in there. You have full control over this money.

Speaker 1:

Now, the donor advice fund it's an account. It can also earn you interest dividends, whatever that may be. And now you know hey, I've got a tax deduction and I've got money allocated to charitable organizations. When you're ready to make that donation, you certainly can make those donations. Now, ladies and gentlemen, when you're doing tax strategy projections, year end projections, your final meeting before year end with your accountant, please make sure you do it with a tax advisor. If you've got an accountant who is putting the right boxes, the right numbers in the right boxes you're not speaking to them constantly, at least four times a year, strategizing on your deductions, taking a look at everything, at the full picture of what you have, even your stocks, even your donations or all these other deductions then I can guarantee you your overpaying in taxes, you can definitely maximize on your tax deductions. What you need to do is look deeper into your finances, into your taxes, and only a tax advisor can help you. Ladies and gentlemen, until next time, that's it for today's episode.

Speaker 2:

Be sure to check out the description below for some free tax reduction resources that Boris put together for you. If you're ready to work with a tax advisor on your tax planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. That's wwwtaxplanningcallcom. And be sure to subscribe to our podcast to be notified when the next strategy is released.