Episode 44. Year End Charitable Donation Tax Strategies

In this year-end tax planning podcast, I cover two powerful charitable donation tax strategies that wealthy individuals use to reduce their tax liability by hundreds of thousands of dollars. If you're facing a big tax bill this year or want to implement proactive tax planning strategies before December 31st, this podcast tells you exactly how to use charitable donation strategies.

First, let's talk about the Donor Advised Fund (DAF) strategy. Forget the noise about opening your own foundation or nonprofit - I'll show you the SIMPLE way to get massive tax deductions. A Donor Advised Fund is like a bank account specifically for charitable donations that you control. Every dollar you put in can become a tax deduction on your personal tax return, and you decide how the money gets invested while it grows tax-free. Cash contributions are limited to 60% of your adjusted gross income, but that's still massive tax savings. Plus, with the new tax law, you can now deduct $1,000 if you're a single filer and $2,000 if you're married filing joint, even if you don't itemize.

The second tax strategy is appreciated stock donations, and this is where it gets really interesting. Why sell your winning stocks and pay capital gains tax when you can donate them instead? I break down how donating appreciated stocks, crypto like Bitcoin and Ethereum, or even artwork can get you a full fair market value deduction WITHOUT paying any capital gains tax. This is exactly how some wealthy individuals donate artwork - they buy art, get it appraised, and donate it for a tax deduction. The same tax strategy can potentially apply to Bitcoin, Ethereum, and any appreciated asset you've held over 12 months.

These donation tax deductions require itemizing on your tax return, so work with a qualified tax advisor to maximize your year-end tax strategies and ensure compliance with IRS regulations. If you need a year-end tax strategy, Donor Advised Funds combined with appreciated stock donations are the way to go. Just make sure you're not trying to be your own donor or opening foundations without a real purpose - that's when you can run into IRS issues. 

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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 ...

Chapters

• 0:00 Introduction to Donation Tax Strategies

Transcript

SPEAKER_01: 0:00

Hey and welcome today. I want to talk to you about two year-end donation tax strategies. Okay, so if you are a charitable person, or if you're not a charitable person and you want to learn about the donation tax strategies, then this is for you. Alright, so what are those two year-end tax planning donation tax strategies? So we're gonna talk about donor advised funds. Okay, so believe me, if anybody tells you that you need to open up your own foundation or your own nonprofit account so that you can put money away into it to reduce down your tax liability, forget all the noise. I'm gonna super simplify it for you and explain to you what is a donor advised fund. Another one of my year-end tax planning strategies that we discuss with our clients a lot is appreciated stock donation. So we're gonna get into that as well. What does that look like? What is an appreciated stock? And really, a lot of wealthy people actually use this strategy with artwork, and I will explain that to you what that looks like. But uh, let's get started.

SPEAKER_00: 1:06

Welcome to the tax reduction podcast for money-making entrepreneurs with Boris Musheev. 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_01: 1:40

Let's first talk about the donor advice fund. So it is also referred to as DAF D-A-F, Donor Advised Fund. Now, what is a donor advice fund? Believe it or not, it is such a simple bank account. Okay, it's a bank account specifically designed or designated, I should say, for charitable donations. So it is your bank account. It is as easy as opening up a bank account. A lot of uh financial institutions can help you open it, or you can open up uh your own, literally, you don't need their help, but it's a bank account that you open. Any money that you put into this bank account that you now own that is designated designated for charitable purposes is is is a tax deduction. Ooh, I got a mouthful there. Sorry. It's a tax deduction on your personal taxes, okay? So you've got a big tax liability, let's say you've got a million dollar profit. And by the way, if you are a business owner that is already making a million dollars or more, you're not working with a tax advisor, you got to get yourself a tax advisor. Because the only way that you can save money on taxes is really having a tax advisor because you need proactive tax planning strategies and donation tax strategies that can literally reduce your tax liability by a lot. So, back to our donor advised fund. So you've got a bank account that you opened up and you've got a million dollar net profit at the end of the year. You're like, I want to reduce this uh net profit, and you have in mind that you want to make a donation in the future years. Let's say there is an organization, you're not ready yet to give them money, but you want to. But you're gonna give them money next year or a year after, and you're thinking, How do I how can I take a deduction for that? Well, what happens is that you just transfer the money from your account to a donor advised fund, which is also your account, and now you get a hundred percent tax deduction. Okay, so again, now the money is sitting in a donor advice fund. By the way, you have a control of how that money can get invested or reinvested. So, depending on what financial institution you work with, your money in a donor advice fund can get invested. It can make it can earn money, which again will be tax free. If you put in 100,000 there and it earned 10% and now it became$110,000, nobody pays tax on this. And now you can take that$110,000 and you can donate it. That's what donor advised fund is. Now you also have to be aware that your cash contributions are limited to 60% of your adjusted gross income. So let's use the same example. You've got a million dollars in taxable income. Okay, you can donate up to$600,000 and get a deduction. If you donate$800,000, the$200,000 will not be allowed this year, but it will be carried forward to the future year. So if you're that charitable, amazing. Okay, all of these tax deductions for the donation go on your itemized tax return. Here's the kicker with a big beautiful bill, the one what is it called? The OBB, the one, the what is it, the one big beautiful bill? Okay, they've actually brought back the donation. When I say brought back, it's like a kind of re-rextension or uh from what they had during the COVID. Uh, when they passed the law, the Tax Cuts and Jobs Act, I think it was part of the Tax Cuts and Jobs Act. But basically, what happened is that you are now able to deduct a thousand dollars if you're a single filer and two thousand dollars if you're married filing joint without even itemizing your taxes. So it is for those that don't want to open up a donor advice fund. But if you're that person that you need a year and tax strategy, donor advice fund beats your personal foundation or your personal nonprofit. Why do I say that? Because a lot of business owners come to me and like Boris, I want to open up a personal nonprofit. I'm like, okay, why do you want to do that? So I can save money on taxes. Okay, do you have a mission for it? Do you have a purpose for it? Are you gonna collect money from the outsiders? Um, no, I just want to have my own nonprofit because I believe in a certain thing, let's say, whatever that may be, right? Giving money to the homeless or whatever that is. Okay, perfect. So you're gonna put money in into that, yes. You will be your own donor, yes. And will you be donating that much money, which is a hundred or two hundred thousand dollars, distribute out in the organization that you build uh believe, right? Believe. And look, yeah, I guess I don't know. I'm I'm not sure, but I want to get a tax deduction. Then then look, you don't need that headache because if you are gonna open up your own nonprofit and you will be your only donor, you could potentially have issues with the IRS. Or if you open up your own foundation and you are your only donor, you will also potentially have issues with the IRS because you've got to have a purpose when you open up these nonprofits. But if you want to do it for the sake of tax strategy and for the sake of tax write-off, you can open up a donor advised fund. You open up a donor advised fund, the money that you put in, it's your own bank account. When you're ready to make that donation from the donor advice fund, you will make that donation from the donor advice fund. All right, I hope this was super helpful. Now I want to talk to you about an appreciated stock, and we'll be right back after this break.

SPEAKER_00: 6:47

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. Bora's 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_01: 7:18

Okay, awesome. Let's talk about appreciated stock. Another one of my favorite year-end tax strategies. So let's imagine this for a second, okay? So I'm gonna give you an example so that you can follow me through. I'm I'm guessing you invest in a stock market. I got a lot of business owners that invest in a stock market. So let's assume you do, okay? Even if you don't, let's assume you do. Let's say you buy a stock, an Apple stock, for$100, even though I don't think it's a hundred dollars today, like it's like way more than that, okay? But let's just assume it's a hundred dollars. You hold a stock for a whole 12 month for more than a year, so now it becomes a long-term investment, right? Because you held it for more than 12 months, it is now a long-term investment. So if the stock goes up to let's say$300, okay, so$100 to a$300, right? It increased in value from$100 to$300. Now you have two options. You're gonna sell the stock right now, and you're gonna realize a$200 capital gain, because it's a long-term capital gain, and you're gonna pay tax on the$200. You're like, wait, I don't want to pay tax on it. Let me just donate this money. And you donate the money, so you pick up the income and you don't make a donation, you now have a wash, so you don't pay tax on this income. All right, that makes sense. Like, what was the purpose of me using this strategy then? Okay, so the second option that you can actually do, you uh basically asset tax strategy, you can take the same stock, so you invest in Apple,$100. Okay, 12 months later, the value of the stock goes up to$300. What you can do instead, instead of selling it and picking it up as an income, you can take that same stock, the same security that you have, and donate it to a nonprofit organization. Now, why would you want to do that? Because what happens is that you don't pick up$200 as an income and you get a deduction for the fair market value. Again, you bought it for$100, but you're taking a deduction for$300 because the stock has increased in value. Now, if you have a nonprofit organization that you support a lot, I will not be surprised if you ask them, Do you accept stocks and donations? And they will say, Yes, we do, because most of the nonprofit organizations are set up in a way to be able to accept those donations. Okay, to accept the donations of stocks. Why? Because people use it as a tax strategy, especially towards year end, nonprofit organizations get very, very busy receiving donations of appreciated stock. Why? Because again, you can buy it at one value, right? Let's say$100, it goes up to$300 12 months later. Instead of you donating your own cash of$300 or selling a stock, pick a stock, picking it up as an income, forget all of that. You just take that stock and transfer it to a nonprofit, you get a donation at the fair market value of that stock. By the way, same is true with cryptocurrencies such as Bitcoin or Ethereum Ethereum, right? Whatever Bitcoin, uh whatever cryptocurrency that you have, you can do the exact same thing with that cryptocurrency. Now, I think at the beginning I also told you a little bit about how rich people do it with art. They pretty much follow the exact same model. They buy art, right? I've read articles about it, by the way. Uh, so they buy art at a certain value, let's say$10,000, they wait a year or a little bit longer, they get it appraised, and remember, the appraisal of an artwork can be subjective, okay? So they buy it for$10, appraise it for$30, or whatever that may be, and then they donate an art that is worth$30,000, excuse me, that they bought for$10,000 that is now worth$30,000 and get a$30,000 donation deduction. The same strategy applies to stocks, okay? So, ladies and gentlemen, that is it for you. Here's your uh year-end tax planning strategies. Now, if you are a client of Boris M tax, so if you are a client and we're doing your tax advisory and we're kicking ass, reducing your taxes, and you think that this strategy could be applicable to you, please make sure to contact your tax advisor at my firm. You know who your tax advisor is. We'll make sure we are implementing this tax strategy for you if it is something you're interested in. And if you're not a BM tax advisor client, I recommend you schedule a free tax strategy. The link is below. Thanks so much.

SPEAKER_00: 11:30

That's it for today's episode. 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 www.taxplanningcall.com. That's www.taxplanningcall.com. And be sure to subscribe to our podcast to be notified when the next strategy is released.