Tax Loophole Alert!!! - Donating appreciated assets!
People are always shocked at this one.
Stocks or cryptocurrency
Say you buy a stock or BTC for 10k and the price goes 3x to 30k.
30k was your defined exit point (you have to have a defined exit, right @TradingwithPhil ??). ...so you sell and pocket 30k.
It has been over a year so it’s a long term capital gain, but you still have a tax bill.
Let’s call it 24% or 4,800 (30k minus 10k = 20k profit * 24% = 4,800 in tax.)
That same year, you also made significant donations to charity - coincidentally 30k.
This donation gets you a 30k deduction, which lets say is worth 12k to you (40% tax rate).
So if you just net the two transactions, you paid 4,800 in tax on the sale and you got 12,000 in tax
benefit on the donation, for a net benefit of 7,200.
In summary, you had a huge gain on a stock or crypto currency, you sold it and you made a huge
donation to a charity. You paid some tax and got some back.
Soooooooooooooooooo many people have done something like this and it is so sad...
Remember, the tax code has basically one section (IRC 61) that says everything is income...
...and the other thousands of pages of code and reg are exceptions to that.
...and so many of the exceptions are for the wealthy.
Who donates appreciated stock??
Yes, the wealthy.
So in the scenario above, rather than sell the stock or crypto for 30k and then make a 30k donation,
YOU COULD JUST GIVE THE ASSET TO THE CHARITY AND NEVER PAY TAX.
That’s right, the 4,800 of tax goes poof, you deduct 30k for an asset you only paid 10k for and still
get the 12k tax benefit on the deduction.
If you are making any charitable donations anyway, consider doing
them in appreciated assets rather than cash AND SAVE YOURSELF SOME TAX!
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