Strategies For Tax Efficiency

If you plan to give more than a few thousand dollars to charity this year, consider whether giving stock instead of cash might be worthwhile. Here’s why… When you give cash to charity, you get to deduct the amount you donate from your taxable income which is a solid tax benefit. But when you give highly appreciated stock instead of cash, you not only get to deduct the value of the stock from your taxable income, you also get to skip paying the long term cap gains tax on those shares. For our clients in CA and NY that’s about 35% in tax savings. This can be a great way to both increase the tax benefit of charitable donations AND unload shares of stock without paying capital gains taxes. Win win! Think about this strategy for old RSUs you’ve held onto over the years, or those Apple, Google, Amazon, Meta, or Nvidia shares you bought that are now worth waaaay more than when you bought them. Assumptions: - You want to donate to charity - You itemize deductions - You’ve held your stock for more than a year - You can give shares of stock either directly to the charity you’d like to support or through a donor advised fund

Chart of the week: Save on taxes with qualified chartable distributions (QCDs)   IRA owners age 70½ and older who don’t fully need RMDs to support their lifestyle, and are charitably included, have a special tool available to potentially save on taxes.   A Qualified Charitable Distribution (QCD) allows those who meet the requirements to donate up to $108,000 in 2025 ($111,000 in 2026) to public charities directly from an IRA. QCDs can be an effective way to give to charity as well as reduce your tax bill, since they are excludable from taxable income. And once you reach the age when RMDs kick in, a QCD can be used to satisfy all or a portion of the RMD that is due from an IRA.   This chart shows a hypothetical example. Say a retired couple has $240,000 of income from various sources (dividends, interest, Social Security, and a pension). They also have a $25,000 RMD, which would increase their income to $265,000. They would like to donate $20,000 to one of their favorite charities. They can make the donation outright in the form of cash (the left-hand side of the chart), or they can make the donation via a QCD (the right-hand side of the chart).   A $20,000 QCD would reduce the couple’s $25,000 RMD, leaving $211,800 of taxable income ($240,000 annual income + $5,000 RMD = $245,000 – standard deduction of $33,200 = $211,800). With a 24% marginal tax rate, the difference in taxable income from a QCD could result in tax savings of $4,800 for the couple. For more on this tax planning strategy, see the link in comments.   #TaxPlanning #WealthManagement #CharitableGiving

🕊️I regularly catch this tax-savings opportunity clients miss. Ever hear of donating highly appreciated investments into a Donor-Advised Fund (DAF)?! If you're already giving donations to charities each year, why not save additional capital gains taxes on your donations? DAFs provide a more tax-savvy way to give. Lemme break it all down... 1. Open a Donor-Advised Fund (DAF) Account Select a provider like Schwab Charitable, Fidelity Charitable, Vanguard Charitable, or a community foundation. Fund Your Account: You’ll receive account details for funding. No minimum contributions are required with some providers, but check for their specific policies. 2. Contribute Highly Appreciated Stock Obtain Transfer Instructions: The DAF provider will give you specific transfer instructions for in-kind securities (stock, mutual funds, etfs). Complete the appropriate paperwork to transfer the investments over. Confirm the Gift Value: The DAF provider will value your donation based on the average of the high and low prices of the stock on the day the transfer is completed. Receive Acknowledgment: Your DAF provider will send you a confirmation of the donation for tax purposes. 3. Allocate Funds to Charities Log In to Your DAF Account: Access your account online or contact the DAF provider. Research Charities: Ensure the organizations you wish to support are IRS-qualified 501(c)(3) nonprofits. Recommend a Grant: Specify the charity, the amount, and the timing of the grant. Many DAF providers allow you to include special instructions or dedicate the grant. Track the Impact: DAF providers will handle the distribution and often provide updates when the charity receives the grant. 4. Keep Records for Tax Filing Save the acknowledgment of your stock contribution from the DAF provider for your taxes. You’ll only need this one receipt, as donations to charities from the DAF don’t require separate deductions (you claimed the deduction when funding the DAF). This process not only simplifies charitable giving but also helps maximize the tax benefits, especially when dealing with appreciated assets and reducing capital gains taxation on low-basis stock! Here’s why this strategy is a win-win: ✨ Maximize Your Impact: You can avoid paying capital gains taxes on appreciated assets (stocks, mutual funds or ETFs that have grown), which means more of your money goes directly to the charities you love. ✨ Get an Immediate Tax Deduction: You’ll receive a deduction for the full fair market value of the stock in the year you donate. ✨ Distribute Thoughtfully Over Time: With a DAF, you can take your time to decide which organizations to support and when. Giving Tuesday, yesterday, was a beautiful reminder of the power of generosity, and thoughtful planning can amplify that power. I'd love to hear about causes you care about (I'll list one of mine in the comments) 🌍✨

Asking for cash is easy. But appreciated asset gifts are a smarter way for donors to give. If a donor writes a check, they get a tax deduction. Maybe they can use it, maybe they can’t. But if they make the same gift as an appreciated asset (owned over 1 year), they get a tax deduction of the same size PLUS they avoid paying any capital gains on the growth. It’s a double tax benefit. This also matters for donors who don’t itemize. For a non-itemizer, giving cash works only up to the $1,000 per person maximum. Beyond that, there are no tax benefits from giving more cash. But there are still tax benefits from giving appreciated assets. Avoiding capital gains tax is a benefit they can get even without itemizing. This is not just a smarter way to give. It’s a smarter way to fundraise. Why? 1.    It helps donors give more at the same net cost. 2.    It shows donors that you want to help them give wisely, not just ask for money. 3.    It shifts the conversation from disposable income to wealth. That last point is the game changer. The most important shift you can make with a donor who already cares about your cause is this: Help them see that their wealth, not just their disposable income, is relevant for giving. That changes everything. When donors think only about disposable-income sharing, they make small giving decisions. When they think about wealth, much larger gifts become possible. Big gifts start to feel feasible, even comfortable. Wealth is not held in cash. It’s not held in checking accounts. It’s held in assets. Stocks. Bonds. Business interests. Real estate. So if we want to unlock wealth-based giving, we need to talk about assets. This is balance-sheet philanthropy, not checkbook philanthropy. The research results are clear: That shift leads to long-term contributions growth. There are many ways to open that door. Share asset-donor stories. Mention asset-giving tax advantages. Include asset-giving options on a donation page. Ask donors about the past, present, and future story of their business or investment. (Spoiler alert: there are only two future plans. They’re planning to sell it or they’re planning to die with it. Both are excellent scenarios for charitable planning options!) Want to shift to wealth-sharing conversations? Start by getting comfortable with asset conversations. The good news is that the training is free. Books, audiobooks, videos, and slide decks on asset-based charitable gift planning are all available at my website for free. (I'll share example chapters in the comments below.)

Appreciated assets like stocks can avoid capital‑gains tax not because the IRS “forgives” the gain, but because U.S. tax law contains specific mechanisms that legally eliminate or defer the tax. The 4 main ways appreciated assets avoid capital‑gains tax 1. Step‑up in basis at death — the biggest one If someone dies holding $500K of stock that originally cost $50K, the cost basis is “stepped up” to the market value on the date of death. Result: The $450K gain disappears, and heirs owe zero capital‑gains tax if they sell immediately. This is why wealthy families often hold appreciated assets until death. 2. Donating appreciated stock If you donate $500K of appreciated stock to a qualified charity, you avoid capital‑gains tax entirely, and you may also get a charitable deduction for the full fair‑market value. This is why high‑net‑worth individuals donate stock instead of cash. 3. Using tax‑advantaged accounts If the stock is inside a Roth IRA, Traditional IRA, 401(k), or HSA…then capital‑gains tax does not apply. These accounts are tax‑sheltered by design. Gains grow tax‑free (Roth) or tax‑deferred (IRA/401k). 4. Harvesting gains in the 0% capital‑gains bracket Many people don’t realize this, but if your taxable income is below a certain threshold, your long‑term capital‑gains tax rate is 0%. For 2026 (approximate thresholds): Single: $47,000 taxable income, and Married: $94,000 taxable income. If you fall in that bracket, you can sell appreciated stock and pay zero capital‑gains tax. These rules exist because U.S. tax policy intentionally encourages: Long‑term investing, Retirement saving, Charitable giving, and Wealth transfer within families. They’re not loopholes — they’re deliberate features of the tax code. These are the primary legal mechanisms used by both everyday investors and ultra‑wealthy families. #USTaxPolicy #AppreciatedAssets #TaxCodes #CapitalGains

I had no idea you can avoid capital gains on charitable contributions in the US. It's pretty well-known that, in the US, you can deduct the $ value of what you give to charity from your income. So if you earned $100k this year and give $5k to charity, your net taxable income is $95k. If you were paying $20k in taxes and now pay $19k in taxes, maybe you can give a bit more. Sweet, but most people know this. What wasn't clear to me is that you can give appreciated stock directly to charity, maximizing your impact. So let's pretend you're sitting on $5,000 of stock that you bought for $3,000. The naive thing Stefan would do is to sell that $5,000 of stock for cash, pay capital gains taxes on the $2,000 (anywhere from $0 to $800), and then send that cash to charity. Only $4,200. What you can do instead is *give the stock* to charity. That way _I_ don't have to sell it which triggers capital gains, and when the charity sells it they don't pay taxes because they're a charity. They get the full $5,000! A lot of worthy charities aren't really set up to receive stock shares - that's kind of cumbersome. So there exist what are called Donor Advised Funds (I use Schwab). These sound complicated but they're not. They're basically micro-charities you set up (you can even give them a cute name!) for receiving *your* contributions, and they go on to distribute cash checks to charities that you suggest. You set up an account, make transfers to it, and the tell them which charities to pass the money on to. Checks in the mail. In the spirit of Thanksgiving, if you're planning on giving this year, this may enable you to give more to your charity of choice and less to Uncle Sam!

I recently met with a client who is required to begin taking RMDs this year. Like many individuals who have planned well, there was no real need for the additional income. What stood out instead was a strong desire to give meaningfully to charity. Their initial plan was straightforward: 1. Withdraw the required ~$45,000 from their IRA. Pay the taxes, then donate the remaining amount. 2. Fulfill the RMD requirement. Check the compliance box and move on. 3. Support causes they care about. Continue a long-standing habit of generosity. The intention was right. The strategy needed refinement. The adjustment? We redirected the distribution directly from the IRA to the charity using a Qualified Charitable Distribution (QCD). The result: 1. The full $45,000 satisfied the RMD. No requirement was missed. 2. The charity received the full amount. No dollars lost to taxes along the way. 3. The $45,000 never showed up as taxable income. Which also help reduce downstream impacts like Medicare premium surcharges and Social Security taxation. The interesting part? The outcome aligned exactly with what the client wanted to do all along. Give generously, just in a more efficient way. For many individuals, it’s not just about reducing taxes. It’s about managing adjusted gross income and the ripple effects that follow across a broader financial plan. I love financial planning because it often comes down to small adjustments with outsized impact. The decision wasn’t about changing behavior. It was about improving execution. Wealth planning works the same way. The options are often already there. The value comes from knowing how to connect them. This is why a thoughtful second set of eyes can make a meaningful difference.

📍Donations Under NTA 2025: All you need to know | Section 164 Analysis If your company engages in corporate philanthropy, this is the game-changer you need to understand! The Nigeria Tax Act 2025 has revolutionized how donations are treated for tax purposes. 📍The change 📌 Old law (CITA 2004): - Only revenue donations were deductible - Capital donations (buildings, infrastructure, equipment) were not deductible 📌 New law (NTA 2025 - Section 164): - Both revenue and capital donations are now deductible! - A clear 10% profit cap has been introduced - The list of qualifying recipients has been expanded Section 164(2) explicitly states: “Any donation made by a company pursuant to subsection (1) may be deducted from the profits of that period notwithstanding that the donation is of a revenue or capital nature.” This is huge for infrastructure-focused corporate social responsibility! 📍What this means for your business? 📌 Before NTA 2025: If you donated a ₦20M school building → Not tax deductible If you donated ₦20M cash → Deductible 📌 NTA 2025: Both the school building and cash donations → Deductible (subject to 10% cap)! 📌 Who can receive tax-deductible donations? 📍Section 164(3) specifies donations to: - Public funds - Statutory bodies or institutions - Religious, charitable, educational & scientific institutions (established in Nigeria) - Bodies under Diplomatic Immunities & Privileges Act (Cap. D9, LFN 2004) - Pandemic, natural disaster or public emergency interventions 📍Critical rules you must know 1. The 10% cap (Section 164(5)): “The total deduction…shall not exceed an amount equal to 10% of the profit before tax of that company for that year.” Example: - Profit before tax = ₦100M - Maximum deductible donation = ₦10M - Even if you donate ₦25M, only ₦10M is deductible! 2. Capital vs revenue - now equal (Section 164(2)): Both types are deductible regardless of nature! 3. Non-cash donation valuation (Section 164(6)): Valued at “the lower of the market value at the time of donation or the consideration paid when acquired” 4. Documentation is mandatory (Section 164(4)): You must provide requisite evidence to tax authorities - no receipt = no deduction! 5. Interaction with section 21: Section 164(1) states this provision works “without prejudice to section 21” which lists non-deductible expenses. This means: - The donation must still meet general deductibility criteria - Proper documentation and compliance remain essential - Certain prohibited expenses under Section 21 cannot be dressed up as donations 📍The excess donation question continues in the comment section.

PSA: consider pulling in charitable contributions to the next few weeks that you were considering making next year. First off, an important disclaimer. I am not a qualified professional, licensed tax professional, lawyer, or financial advisor. If you have one, you should consult them. Nothing here should be construed as financial, investment, or legal advice. There are some large changes coming January 1 with OBBBA regarding how charitable contributions can be deducted. If you are a high earning filer who contributes to charity regularly and itemizes your deductions, you probably need to take a moment *right* now to do a bit of research. The first 0.5% of your AGI will no longer be deductible as a contribtuon. Additionally charitable contributions will be capped at the 35% bracket vs 37%. This overall suggests a new strategy of "batching" donations into high giving years and just claiming a standard dedution in off years. If you have a Donor Advised Fund (DAF), I'd take a look at "pulling in" contributions you were planning to make next year to get the full 2025 benefit. If you don't, I'd recommend either opening one (it's pretty easy to do and costs nothing; we use Schwab) or simply directly contributing to your favorite charities early - making your 2026 donation in 2025. If you're thinking about getting involved in charitable giving but aren't sure where to start, I'm very happy to be a resource for you and your family. It can be incredibly gratifying to see real positive impact in your community and in the world from your giving.

As Dec 31 approaches, how can you best maximize your donation impact while being tax-smart? Giving to charity is incredibly fulfilling, but did you know there are smarter ways to give than writing a check? How to Give STRATEGICALLY (to SAVE on taxes) 1️⃣ Donate Appreciated Securities - Instead of cash, consider donating stocks, bonds, or mutual funds that have increased in value. You’ll avoid capital gains taxes and potentially claim the full fair market value as a deduction. 2️⃣ Open a Donor-Advised Fund (DAF) - A DAF lets you make an immediate charitable contribution (and get a tax deduction) while taking your time to decide which causes to support. Bonus: the funds can grow tax-free in the meantime. 3️⃣ Qualified Charitable Distributions (QCDs) - If you're over 70½, you can donate directly from your IRA. This can satisfy your Required Minimum Distribution (RMD) while reducing taxable income. 4️⃣ Use Your Portfolio to Rebalance with Purpose - Rebalancing your investments? Instead of selling securities, donate appreciated ones. You’ll reduce taxes and make a bigger impact. 5️⃣ Check for Employer Matching Programs - Many companies match charitable contributions. Double your impact with no extra cost to you. Remember, consulting a legal, tax, or financial advisor is key to getting the most out of these strategies. What’s your favorite tax-smart giving tip? Drop it in the comments!