Tax-Smart Investing
If done properly, investing can greatly benefit your tax plan. Our team is up to date with the latest strategies to help you and your CPA get the advantages of tax-smart investing.
Has Your Million Dollar Business Outgrown Your CPA/Tax Planner?
By Brian Crane
All businesses start from zero. They all earn their first dollar. They have their first expense. They face their first challenge and hopefully experience their first win. If you have built a business, chances are you have experienced a lot of “firsts” and you will continue to experience other “firsts” down the road.
If you are a business owner then one of your first “firsts” was filing your first tax return with a business now involved. When this occurred you may have worked with someone close to you, someone you found quickly, or someone that was less expensive. Or you may have even prepared your own tax return by using an online program. Like other decisions, you needed to get the task at hand done and may have found the way you believed to be the most efficient.
There’s a chance that now years later you are using the same tax solution you were using when you first started.
You enjoy using that accountant you started off with. You feel inclined to stick with them because they were with you from the beginning. You feel the need to stay loyal. Or maybe you fall in the camp of being someone who takes a few hours out of an early spring evening to fill out and complete your tax return on your own.
Are these the best solutions moving forward…?
For some, there is nothing wrong with what’s worked from the beginning. But…let’s stop for a second. Assess where your business is at this point in time. If you have seen substantial growth and are now operating at a different level from when you started let’s ask ourselves the question:
Has my business outgrown my CPA/tax professional?
Your business may have grown and not be the same entity that it once was. And with that, you may have outgrown your CPA. The strategies and tax planning needed for larger revenue generating companies can be different and more complex compared to what a brand-new start up can utilize.
If you are starting to see revenue, creep up over a million dollars there may be strategies and options available that may make sense now versus when your business was brand new. A number of larger organizations are utilizing a variety of tax strategies to be more tax efficient. Wouldn’t you want too as well?
Is your CPA/tax planner aware of strategies available to you?
Are there tax savings available to you that you are not accessing?
Our tax team is familiar with tax planning strategies that higher income earners and businesses can utilize to find efficiencies. If you or your business falls in the realm of generating higher revenue and being more complicated, it may be time to have a second set of eyes look things over. Having an outside opinion may offer insight you have never considered, bring value in underutilized areas, and potentially offer tax savings that directly impacts your wallet.
The Legacy comprehensive and methodical approach to investing gives you the peace of mind that you’re doing everything you can to lower your taxes. Legacy has the insight and ability to let you keep more of what you have built.
Justin Martin, Legacy Wealth CEO
A Gift That Keeps on Giving
Do you know that feeling that you get when you do something great for someone else? Wouldn’t it be nice if you knew you could also benefit your bottom line on Tax Day while helping a fantastic nonprofit or charity? We call that a win-win, my friends.
Charitable contributions are a fantastic thing to consider, especially toward the end of each year. There are several ways to find causes to support. If you know of a local nonprofit or charity in need, that is a great place to consider a donation. You may use online tools such as Charity Navigator, GuideStar, and Better Business Bureau’s Wise Giving Alliance to check organizations. Several groups like after-school programs and local arts organizations often fly under the radar but are incredibly grateful for every dollar they receive.
Once you have chosen a cause for your tax-exempt donation, what is the best way for you to give? The most straightforward method is a cash or cash-equivalent gift (many groups accept Venmo, etc.). Instead of contributing a simple donation, another option could be the gift of appreciated stock. If you itemize and own a stock for more than one year, you can deduct the stock’s value the date you gift it to a charity. If you do not itemize, you can also save using this route by avoiding long-term capital gains taxes on your profits (which could cost up to 20% if the stock sold first). Several charities can accept appreciated stock, but another option is utilizing a donor-advised fund to help with gifting.
Donor-advised funds offer several routes in addition to the donation of appreciated stock. Real estate, limited partnerships, privately held stock, and even assets like a pig farm can be donated through a donor-advised fund. When it comes to people who have highly appreciated non-cast assets, donor-advised funds can help to investigate if these assets could make good charitable donations (for both the giver and the receiver). If donating property other than cash to a qualified organization, you may generally deduct the property’s fair market value. Speaking with a financial advisor will help ensure that your Adjusted Gross Income (AGI) is as low as possible and help you look outside the box in exploring your giving options.
People above 70½ can donate up to $100,000 per year tax-free from their IRA to charity. This process, titled a Qualified Charitable Distribution (QCD), can significantly help both the taxpayer and the nonprofits on the receiving end. During 2020 there is another bonus in giving, as there is an incentive for a $300 charitable deduction on top of the standard deduction (no itemization required), which is $12,400 for single filers in the 2020 federal income tax year and $24,800 for those married and filing jointly. In most cases, the amount of charitable cash contributions taxpayers can deduct as an itemized deduction is limited to usually 50%-60% of an individual’s AGI.
If you think about all the good done in your community and around the world by nonprofits and charities, it is astounding. Several health and human service organizations, schools, shelters, theaters, and more operate as a nonprofit. According to the National Philanthropic Trust, during 2019, the largest source of charitable contributions came from individual donors. These donations equaled $309.66 billion and 69% of the total giving these organizations received. Why not help a commendable nonprofit breathe a little easier this holiday season while you help your bottom line as well? This gift might be even easier than trying to figure out something to give to your teenager this year.