At The Weddle Team, we are fully supportive, “rendering to Caesar the things that are Caesar’s.” We are not big fans of rendering more.
We believe this because we believe that you - our clients - and your favorite charities can do more and better to alleviate human suffering and encourage human flourishing than government bureaucracies. With this in mind, let’s try to reduce some optional taxes where tax law encourages us to do so. Also, run all of these ideas by your CPA. We are financial advisors, and none of this is meant to supplant your common sense or the expertise of other professionals. If you want us to be in that conversation with your tax advisor, we’re happy to join.
For those of you with non-qualified investment accounts (think JTWROS, TOD, Individual accounts, etc.), these accounts may have highly appreciated stock in them. For example, let’s say you put $50,000 into “Electric Vehicles R Us” stock back the early days. Years later, your stock is worth $400,000. If you sell, you’re looking at a capital gains tax on $350,000 (value – what you paid for it). So what can you do? Two things.
First, you could look for a loser in your account that is down. Let’s say you also own “Retail Real Estate R Us”, and the $50,000 you put there years ago has shrunk to $10,000. If you sell your losers for a $40,000 loss, you get another $40,000 of winners to sell for no capital gains tax. So that’s one route.
Second, if you had wanted to give some money to charity, you could give the stock instead. If you gave $50,000 of stock, you are likely to have a $50,000 deduction against your ordinary income, and it only cost you $6,250 (If $50,000 x 8 = $400,000, then $6,250 x 8 = $50,000). If you liked that stock, you could buy it back in your account after giving it away to charity.
This is easier to see on a whiteboard than to understand in paragraph form, so if you’d like to grab your CPA and hop on a zoom call to review these strategies, let us know. We are here to serve our clients and those that matter the most to you.