Philanthropy or charitable donation brings betterment and change to our society. High-net-worth individuals or individuals with higher capital can significantly transform and bring change. It’s not just their responsibility but charitable giving can bring several benefits to their wealth and business.
Xerxes Soli Mullan, founder of Avestar Capital has shared tactics for strategic philanthropy for high-net-worth families that make philanthropy a much more than just donation. We’ll introduce certain ways that can allow high net-worth individuals with higher capital gains on business to reduce without affecting their business.
This approach of saving tax is known as tax-loss harvesting. In this setting, a highly taxable individual claims investment losses or general losses which might reduce the overall taxable amount of that particular income. Let’s understand in detail how wealthy families can maximize charitable impact. One can identify their assets as depreciating, creating a gap in monetary valuation, resulting in less IRS to reduce tax or even write off. Such an approach is suitable for HNWIs who come under higher tax slabs/brackets.
Charitable Gain Harvesting
A charitable gain harvesting is the same way as tax-loss harvesting which writes off charity as a loss. “Benefits of philanthropy for high-net-worth families is the ability to reduce their taxes. By identifying assets with massive unrealized gains and donating them to charity. You could impose the charitable donations as asset losses and generate a lower taxable income.” Xerxes Soli Mullan.
This tax-planning tool can highly balance high-profile portfolios with appreciated assets attracting less taxation. Professional philanthropy planning for wealthy families guides their clients to donate a certain way. It allows them to retain some income and provide better donations to their charitable organization.
When high-net-worth individuals (HNWIs) contribute appreciated stocks or other assets directly to a charitable organization, they become eligible to claim a charitable deduction equivalent to the fair market value of the asset at the time of the donation. This arrangement not only ensures that the charity benefits from the full value of the contribution, but it also allows the donor to circumvent capital gains taxes on the appreciated value of the asset.
Benefits of charitable gain harvesting:
Recognize the full value of their donation: The charity receives the appreciated asset, maximizing its impact and effectiveness.
Avoid capital gains taxes: By donating the asset, the donor circumvents the taxes they would have owed had they sold it.
Claim a charitable deduction: The donor can take a deduction for the full fair market value of the asset, potentially reducing their taxable income.
This technique provided by Avestar Capital founder; Xerxes Soli Mullan, has certain crucial implications. It allows HNWIs to create a difference by aligning their values and wealth for meaningful contributions. Personal philanthropic efforts done in the time of forced corporate social responsibility are needed. It builds a reputation and goodwill amongst the community.
Philanthropy and Family Legacy
Professional philanthropy planning for wealthy families is not just an act of kindness, it’s a social and personal responsibility, now partnered with a sophisticated financial strategy. This makes it easier for wealthy individuals to deal with the tricky world of high capital gains taxes. By using “Charitable Gain Harvesting,” they can cut down on their tax bills while still giving a solid boost to causes that matter to them. Avestar Capital philanthropy advisory amongst the leading Multi-Family Offices in the USA, helps their clients spend more time on their business while providing financial support to better match their wealth and charity goals.
