It is recommended that small businesses should donate 6% of their profits and sales to charitable causes.
Donating profits can help you and your employees feel like you are making a difference and can even draw in more business.
If you want to put your money to good use, you have a couple of options to consider.
Continue reading to discover how giving charitably can help you save on taxes and improve your company!
1. Remainder Trusts
Giving charitably through remainder trusts are a good idea if you have a lot of highly appreciated assets.
Remainder trusts allow you to liquidate your assets and there is no tax consequence when doing so. After you donate to this trust, you will be able to get a tax deduction that applies to your current income.
One of the best things about this type of charity is that you can continue to get the benefits of your assets for the rest of your life. After you die, the rest of your assets that you have remaining will go to whichever charity you choose.
Becoming a philanthropist can open your eyes to all of the types of charities, you can select one with special meaning. In many office settings, the entire team will vote on the charity of their choice.
The more involved that you and your employees are with the charity, the more meaningful and impactful you will be. Take the time to discover the best place for your money to go towards.
Our guide can help you find reputable charities that can help a lot of people!
2. Donor-Advised Funds
Donor-advised funds (DAF) are a great way to give back to a charity and help you get tax breaks.
Over time you can contribute assets, cash, and other securities to this fund. You can get tax breaks as soon as you begin adding them. Once you have made your investments, they will increase and be tax-free.
Donating stock to charity is one way you can handle a donor-advised fund. You can also invest checks and mutual fund shares. If your business has hedge fund interests or private equity, you can even use these for your investment.
Less common assets that you can put towards this charitable fund include retirement savings and Bitcoin.
3. Lead Trusts
If you are looking for a way to donate more than you already have, charitable lead trusts are recommended.
In a lead trust, you can donate a portion of your profits for an extended time. You can put these donations towards one or more philanthropies. Whatever money is remaining typically goes to your beneficiary or family.
Many people consider lead trusts to be the inverse of remainder trusts, that are mentioned above. They are irrevocable and meant to reduce tax liability, once inheritance occurs.
It is recommended to put your money towards this trust if you have a lot of taxable income. You can use this charity to lower your taxes and help your family. You can also get savings through estate and gift taxes as well when you have charitable lead trusts.
4. Local Community
Does your business play a large role in the local community?
By donating to local community foundations you can help the people in your area, feel good about it, and save on taxes. Typically businesses will donate to nonprofits of any size.
Most community foundations revolve around the arts, education, and health services. Disaster relief and environmental corporations in your area can also accept donations. There are more than 750 community foundations in the United States. They can be found in rural and urban areas.
The purpose of community foundations is to help improve the lives of the people in a certain area. This area is determined by geography and can help individuals and businesses. The money will go towards clubs and other charities that put arts, sports, and culture back into the community.
5. Private Family Foundations
Most private family foundations are set up by families with assets.
If you wanted to start a private foundation to donate to, you must come up with a name and fill out some paperwork. You can also donate money to other private foundations. When you donate to them, you will be able to use it as a tax write off and will save you money.
Many people choose to donate to private family foundations because they have a connection with it. If you want to make an impact on a family and their cause you should consider this type of donation.
It will bring you closer to your customers and can make the biggest impact.
Not only will you get tax deductions immediately, but you can also avoid capital gains tax and have minimal estate tax liability.
Giving Charitably Can Help You
Did you know that you can improve your business and cut your taxes by giving charitably to various foundations and trusts?
If you have the extra money in your business and want to put it to good use, you have several options. Charitable remainder trusts and lead trusts can ensure that your family and business are safe even after you pass.
By giving to the local community and family-run foundations, you can help the people in your area that support your business. Not only does giving charitably help lessen your taxes, but it can also help get you more business.
Be sure to contact our team today for assistance with Charitable planning, business law, and more!