DIY

Taxes: This easy hack helps you save more while doing good

July 23rd, 2020

I hate tax season, and I know I’m not alone. It’s bad enough that I have to spend tons of time gathering all of my W-2’s and 1099s, figuring out my deductions, and probably giving up and hiring an accountant. But when I owe big – that’s even worse.

Owing to the government

If you’re anything like me, you’re scrambling at the end of the year trying to figure out how many deductions you’ll be able to take to avoid that big, big bill. And every tax year, you’re in a sea of paperwork, wishing you had done more to lower your taxes.

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Karolina Grabowska - Pexels Source: Karolina Grabowska - Pexels

You’ve already donated to causes you believe in

It’s not like there aren’t organizations you want to give to. You always donate to the causes you believe in, and you take time every year to make sure you’re picking the organizations where your donation will have the most impact. Let’s say you’ve donated to the NAACP defense fund, your local bail fund, and the Okra Project on your list because of everything that’s happening in the world right now. And you never miss your yearly donation to Worldvision, a relief organization helping children all over the world.

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World Vision Source: World Vision

You want to give as much as you can, both to further these organizations and to save money on your taxes. It’s just that you only have a certain amount of money in your budget, so your donation can only be so impactful – or so you thought.

This was my exact predicament until I found this easy hack.

Making your impact bigger and multiplying your return

Once I found this simple hack, my taxes and my impact looked completely different. I discovered one simple thing that totally changed how I filed my taxes.

I started donating stock.

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Alexandar Mils - Pexels Source: Alexandar Mils - Pexels

Why did I donate stock?

I know, I know, it sounds like a whole complicated thing to donate stock. Trust me, it’s not. I used an online service called Cocatalyst that handled gifting appreciated stock from my broker to the charity. But more on that later.

I always make a big year-end donation. I save on my taxes, and my community gets a nice little boost. Everybody wins. But every year, I wish I could do more – for myself and for the organizations I support.

It’s not as hard as it sounds

This year, I found out that if you donate stock instead of cash, you avoid paying capital gains tax. I had bought stock for $5,000, and it increased to be worth $15,000. So I decided to sell off the $10,000 and use this money to donate to a charity. If I had done that, I would have had to pay a capital gains tax up to 37%. I thought that was just the way it was, so I was prepared to pay up to $3,700 of my increased stock value in taxes, and donate the $6,300 left over to my nonprofit.

But thankfully, I did some research about stock donations, and found this better way.

It turns out that if I donated the stock directly to the organization instead, I wouldn’t have to pay capital gains tax at all, and they would get to keep the full $10,000.

Can you imagine what an extra $3,700 does for a local community organization, a religious institution, or an after-school program? That makes a serious difference in their programming, building maintenance, outreach, and more.

That’s a win-win! I brought this idea to my organization, and they were so excited that I had found this way to give them a bigger donation. They said they had heard of other organizations accepting stock donations, but they had never tried it because they thought it would be too complicated. But luckily, I had the answer to that, too

How do I donate stock?

Now, I know you’re wondering how to do a stock donation to charity. Don’t worry – you can do it really easily, even today.

First, just a few quick things. One, make sure you’re donating appreciated stock that you have held for at least a year. If you have a losing stock, you should sell it and take the capital loss. You can still donate the cash value to your organization.

Two, pick out which stock you have that has gained the most. I know that takes an extra minute headache – but trust me, it is worth it to maximize your tax savings.

And three, be smart, like me, and use a stock donation service. I don’t have time to figure out a million forms and whatever just to try to improve my community and save myself some dollars. Cocatalyst took care of literally everything for me. I just went to their website, filled out a form, signed it, and they did everything else. It was awesome.

swiggle1 dot pattern2 Cocatalyst is a tool to donate appreciate stock to charities.
Cocatalyst.org Source: Cocatalyst.org

So. Save big on your taxes, and help your community.

It was the best decision I made all year. And I got to help save the local animal shelter!

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Helena Hope-Pexels Source: Helena Hope-Pexels

Source: Cocatalyst, Investopedia

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