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Tax Benefits and Community Impact of Donating

Written by Akram Hassan on . Posted in Financial Planning, Wealth Management.

Introduction:

In the spirit of generosity and community support, gifting and donating to local nonprofits brings joy to those in need and offers financial perks for the giver. In this post, we’ll explore the dual benefits of contributing to your community and some of the tax advantages of charitable giving.

What Do Local Nonprofits Do:

Local nonprofit organizations play a fundamental role in supporting thriving communities by delivering essential economic stability and mobility services. Additionally, they enhance communities in various ways. Often, leaders of nonprofits act as the voice of the individuals they serve by advocating and bringing forward awareness. They provide a platform for collective efforts toward the common good, translating shared beliefs and aspirations into tangible action. These organizations give substance to our most ambitious dreams, ideals, and noblest causes.

Currently, an estimated 1.3 million charitable nonprofits in the United States are engaged in activities that span feeding, sheltering, educating, healing, enlightening, inspiring, and nurturing individuals across all age groups, genders, races, and socioeconomic statuses. Their impacts are felt throughout the country. These nonprofits actively promote civic engagement and leadership, stimulating economic growth and helping our communities thrive daily.

The Tax Advantages of Gifting and Donating

Understanding Charitable Deductions:

A charitable donation is a gift of money or goods to a tax-exempt organization as defined by the IRS Section 501(c)(3) that can reduce your taxable income. To claim a deduction for charitable donations on your taxes, you should have donated to an IRS-recognized charity and received nothing in return for your gift.

Tax-Advantages For Giving:

You can generally deduct up to 60% of your adjusted gross income via charitable donations. However, the limit may vary depending on the type of contribution and the organization. The deduction limit applies to all donations made throughout the year, with excess contributions eligible for deduction over the next five years through a carryover process. Make sure to consult your tax professional, as there are variables that may affect your specific strategy, and they will ensure up-to-date IRS rules.

Year-End Planning:

Strategic giving at year-end is crucial for maximizing tax benefits. This is commonly seen with seniors donating their required minimum distributions at the end of the year. Instead of scrambling at year’s end, you can contribute to your preferred local community nonprofits throughout the year with proper future planning.

Documenting Your Charitable Contributions

Keeping Detailed Records:

Maintain records of all tax-deductible donations, including bank or credit card statements and receipts from the charity. For automatic deductions through employers, keep W-2s or pay stubs indicating the amount and date of your donation. IRS rules may not allow a deduction for the value of your time, but expenses related to volunteering can be counted as tax-deductible donations. Keep track of expenses directly connected to volunteer work, such as mileage to charitable events, and retain receipts for potential audits. Consult your tax professional for the most accurate advice regarding your unique financial plan.

Additional Documentation:

Obtain a written acknowledgment from the charity for cash or property donations exceeding $250. If deducting at least $500 in noncash donations, complete Form 8283 and attach an appraisal for items exceeding $5,000 in total value.

Conclusion:

In conclusion, donating provides a powerful avenue for individuals to impact their local community and taxes positively. By understanding the tax advantages of charitable giving and recognizing local nonprofits’ significant role in community development, individuals can experience the joy of giving while contributing to the well-being of those around them. Remember, this article is meant to inspire curiosity, so consult with a tax professional for personalized advice based on your specific financial situation.

 

Investment Management

How I Became Obsessed with Financial Markets

Written by Akram Hassan on . Posted in Investment Management, Wealth Management.

This journey traces back to when I was about 13, circa 2002, working at my parents’ restaurant and reading newspaper stock reports. During this time, satellite radio was a relatively new concept. I did a little research on it, contemplating how we lose radio signals while driving between cities on family vacations. We were road warriors, often going to Orlando or Miami from Clearwater, having to find new music stations or endure static for an already scary drive through Alligator Alley.

With satellite radio, the connection loss wouldn’t be a significant issue. Though many cars lack the necessary capabilities, I believe that as technology evolves, it will become more widespread. XM Radio became the first publicly traded company I followed. When I asked my parents about investing and how to buy shares, I received no guidance. This wasn’t Their fault; they were regular, middle-class American immigrants without exposure to capital market investing.

At that time, I thought eventually, every car would come equipped with satellite radio, and traditional FM signals would be obsolete. As a 13-year-old, I was about 50% right. Not bad, huh? I spent days reading the stock and business section of the newspaper, building a watchlist in my journal while tracking gains and losses, and essentially engaging in paper money trading. However, my interest quickly faded when the FIFA World Cup started, diverting my focus to typical teenage pursuits.

Fast forward a few years to when I started earning a livable wage and had to manage things such as buying groceries. As a private first class in the army deployed to Afghanistan, I had no “real” bills. Like any good soldier pursuing peak physical condition, my budget allocation revolved around vitamins, diet, protein, and pre-workout supplements.

In 2012, with cash in the bank earning minimal interest and CDs offering little, I contemplated buying property in Brazil, anticipating an increase in GDP and economic stimulation during the years leading up to the 2014 FIFA World Cup. Having lived through the 2008 financial crisis in Florida, I was aware of property price fluctuations. I remembered the market recovery and thought it was an excellent opportunity.

However, after researching how to buy property in Brazil, I realized it was impractical with the funds I had. Property prices in Brazil were higher than expected, and lending was impractical. Add on the logistical nightmare it would have been to manage. Exploring alternative options, my research eventually led me to the stock market, where I discovered ETFs (Exchange Traded Funds). Buying a basket of assets invested in the Brazilian economy seemed brilliant.

It was easy to open a USAA or Fidelity investment account and invest in a Brazilian ETF’ focused on real estate and utilities supporting residential middle-class living. My optimism took a negative hit when the FIFA World Cup passed, and Brazil’s leadership faced major investigations, resulting in government officials being jailed for corruption. The government and oil companies were accused of stealing from the people, leading to soaring unemployment and poverty levels.

Consequently, my Brazilian investments dissolved, teaching me a valuable lesson about the necessity of an exit strategy and how geopolitical climate can influence market performance. This experience hooked me into the financial markets. Alongside my Brazil investment thesis, I bought Amazon shares at less than $226 per share. Still a rookie self-learning investor, I was learning to differentiate short-term swing trading strategies versus long-term buy and hold.

Hien’s sight is always 20/20. If I had known then what I know now, precisely, long-term investment strategy following the Warren Buffett approach, I would still be holding Amazon stocks today. After an est. 80% return. I thought it was enough and didn’t want to get greedy, so I sold my stocks, taking profits. I also divested from a few other investments to balance the portfolio. As an aside, I can say I did learn about tax loss harvesting early on!

At this point, I started to share my knowledge and teach my fellow soldiers budgeting, investing, and the importance of contributing to the TSP (Thrift Savings Plan, the government’s 401k equivalent). I hoped they, too, would leverage compounding interest over their military careers. This reignited an old interest, prompting me to return to school to pursue a finance degree. Today, I proudly share that I’ve turned a childhood interest into a company that assists individuals and companies with financial planning, investing, and making sound financial decisions.