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The Propeller – Pay Less in Taxes while support your Favorite Charity or Church! – 10-20-2024

Getting Started

Have you ever found yourself overthinking your next big move? Whether it’s starting a business, investing for retirement, or even getting off the couch to do that home project, we often feel like everything needs to be perfect before we take action.

But here’s the truth: it doesn’t.

You don’t need to make a huge splash right out of the gate. It’s about starting small and building momentum. One step at a time, those small actions will add up to something significant. And what really matters is that you start.

Think about that business idea you’ve been mulling over, or the retirement investment you’ve been hesitating to set up. Is there a small step you can take today to get closer to that goal? It doesn’t need to look polished or be perfect from the get-go. The real power comes from forward movement.

In entrepreneurship, investing, or even day-to-day life, waiting for the “right moment” often means missing opportunities. The path to success rarely unfolds all at once—it’s a series of adjustments, learning as you go.

So, don’t let the pressure of starting big hold you back. Take that first step with what you know now. You can figure out the rest along the way.

Do you need some help starting out with a project, reach out to me and let me know how I can help!

Finance: The Smart Way to Give – How Donating Appreciated Shares Can Save You Big on Taxes

Giving to charity or tithing to your church is one of the most rewarding things you can do—but did you know there’s a way to give that’s also incredibly rewarding for your finances? Donating appreciated shares of stock or other securities to charity can offer you significant tax savings, allowing you to give more while paying less. Let’s break down why this method is so powerful and how it can work for you.

Why Donate Appreciated Shares?
When you donate appreciated shares, you avoid paying the capital gains tax you’d owe if you sold the shares yourself. This means you permanently eliminate the tax liability that’s hanging over those gains. On top of that, the charity receiving your donation doesn’t have to pay any taxes either, since they’re a tax-exempt organization.

The result? More money goes toward the causes you care about, and you get a greater tax benefit. It’s a win-win for everyone involved.

Breaking Down the Tax Benefits

To understand how this works, let’s break down a hypothetical example.

Suppose you bought shares in a tech company a few years ago for $5,000, and those shares are now worth $15,000. If you were to sell those shares today, you’d have a gain of $10,000. Depending on your tax bracket, you could owe up to 20% in federal capital gains taxes on that $10,000 gain, which means you’d pay $2,000 in taxes.

After selling the shares and paying the capital gains tax, you’d be left with $13,000 to donate to charity. Now, let’s look at how donating appreciated shares directly compares:

Sell Shares and Donate Cash:

Current Value of Shares: $15,000
Capital Gains Tax (20% of $10,000 gain): $2,000
Amount Left to Donate: $13,000
Charitable Deduction: $13,000

Donate Appreciated Shares Directly:

Current Value of Shares: $15,000
Capital Gains Tax Owed: $0
Amount Donated to Charity: $15,000
Charitable Deduction: $15,000

By donating the shares directly, you’re not only giving the full $15,000 to the charity instead of $13,000, but you also get a charitable deduction for the entire market value of the shares. Plus, you avoid paying the $2,000 capital gains tax altogether. The charity benefits from a larger donation, and you benefit from eliminating that capital gains tax liability.

The Math Behind the Savings

Let’s take a closer look at the numbers to see just how beneficial this strategy can be.

Capital Gains Tax Savings: By donating appreciated shares, you avoid paying the $2,000 capital gains tax you would have owed if you sold the stock yourself.

Charitable Deduction: By donating the shares, you get a charitable deduction for the full current value of the shares—$15,000. If you’re in a 32% income tax bracket, this deduction could save you $4,800 in federal income taxes.

In total, this strategy saves you the $2,000 in capital gains taxes plus provides a $4,800 deduction benefit. That’s a combined savings of $6,800 while donating $15,000 to charity, instead of $13,000 with a simple cash donation.

Why It’s Better for the Charity or your Church Too

You might wonder why it matters to the charity or church whether you sell the shares and donate the cash or donate the shares directly. Here’s the key: charities don’t have to pay capital gains taxes because they are tax-exempt organizations. This means when they sell the appreciated shares, they get the full $15,000 to support their cause.

If you sell the shares yourself, you end up losing part of your gift to taxes, meaning less money ends up in the hands of the charity. By donating the shares directly, you ensure that the charity gets the maximum benefit.

How to Donate Appreciated Shares

Donating appreciated shares isn’t as complicated as it sounds. Most charities have a brokerage account that can receive donations of stock. Here’s a simple step-by-step:

Contact the Charity or church: Make sure the charity can accept stock donations. Most larger nonprofits are well-equipped to handle this, but it’s always good to double-check.

Contact Your Broker: Once you know the charity is ready to receive your shares, contact your broker and request a transfer. You’ll need to provide the charity’s brokerage account details.

Confirm the Transfer: Make sure to follow up with the charity to confirm they’ve received your donation. This ensures everything goes smoothly, and you’ll also need a receipt for tax purposes.

Keep Records: For tax purposes, you’ll need to keep records of the donation, including the date of the transfer and the value of the shares at the time of donation.

When to Consider Donating Appreciated Shares

Donating appreciated shares is particularly advantageous if:

You Have Highly Appreciated Stocks: If you’ve been holding stocks for a long time and they’ve significantly increased in value, this strategy can help you avoid paying hefty capital gains taxes.

You Want to Maximize Your Charitable Giving: By eliminating the tax liability, you can make a larger impact with your donation.

You Need a Tax Deduction: This strategy allows you to take a deduction for the full fair market value of the shares, which can help reduce your taxable income.

Giving Smarter and Saving More

Charitable giving doesn’t just have to be good for the recipient—it can be good for you, too. By donating appreciated shares instead of cash, you can maximize your gift, avoid paying capital gains taxes, and receive a larger charitable deduction. It’s a strategy that allows you to give more to the causes you care about while keeping more money out of the taxman’s hands.

If you’re looking for ways to make a real impact while making your finances work for you, donating appreciated shares is worth considering. Always consult with your financial advisor or tax professional to ensure this strategy fits with your overall financial goals. After all, giving back should feel good—and with the right approach, it can also be financially smart.

What is a CLUE Report and Why You Should Check It Regularly

A CLUE (Comprehensive Loss Underwriting Exchange) report is like a credit report, but for your insurance history. It provides details on claims you’ve made for auto and home insurance, and insurance companies use it to assess your risk when determining your premiums. Just like your credit report, it’s crucial to check your CLUE report every year to ensure its accuracy and avoid unexpected insurance hikes.  I know many people who have found insurance claims that weren’t their own and affected their insurance rates.

To learn more about CLUE reports and how to request yours, visit my detailed guide here: https://www.leonardmack.com/clue-report-check-it-like-you-check-your-credit-report/.

Keeping your CLUE report in check can save you money and prevent surprises, just like maintaining a healthy credit score!

Quote of the Week
“Never complain and never explain.”
Benjamin Disraeli
 
The quote reminds me that sometimes, it’s best to simply let things be. In life, there will be moments when things don’t go our way. It’s tempting to vent our frustrations or try to explain why something didn’t work out, but this quote suggests a different approach: restraint.

Imagine you’re in a group project at work, and your part didn’t turn out as expected due to circumstances beyond your control. It’s easy to want to explain or blame the situation. But instead, you could focus on moving forward and improving without dwelling on excuses or frustrations.

This mindset encourages grace under pressure—allowing your actions to speak louder than complaints or justifications. It’s about trusting that things will fall into place without the need to explain every misstep. Ultimately, the lesson here is that resilience and quiet confidence can be far more powerful than words.

In entrepreneurship, this quote is an especially valuable mindset. When you’re building a business, setbacks are inevitable—whether it’s a product launch that doesn’t go as planned or a deal that falls through. Instead of getting bogged down in justifying failures or blaming external factors, this quote encourages entrepreneurs to stay focused on solutions and growth. Rather than wasting energy on complaints or explanations, successful entrepreneurs channel their efforts into learning from mistakes and adapting quickly. It’s about maintaining credibility and resilience, showing that your ability to push forward speaks louder than words or excuses. This approach builds trust with your team, clients, and investors, reinforcing the idea that challenges are simply part of the journey, not a reason to slow down.

 

May your ideas be as bold as your investments (and hopefully, with better returns),

 

This is re-published from the weekly email sent by Leonard Mack entitled The Propeller. To subscribe, visit https://www.LeonardMack.com/subscribe and read it every Sunday evening.

This intellectual nourishment is intended for informational purposes only. One should not construe anything herein as being legal, tax, investment, financial, or other advice.

My rule is this – I have no advice to give, only experience to share. I have no interest in being a guru or telling people what they should do. Rather, I share my own experience because there is no right or wrong. Your mileage may vary.