I don't OWN it, I CONTROL it

[Wimtbimtb]

Bump this up for the newer folks

 

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[100k]

Gymjunkie, a personal q: What is the max you've ever earned in a year?

If it's less than $100,000, it's natural for you to feel this way.

Once you've worked your tail off for years to build a business, and it starts to generate big bucks, it's painful to see hundreds of thousands of dollars go to the tax man each year.

You ask yourself: "Is there another way?"

The answer is: Yes!

And its' not tax evasion, or anything fraudulent.

It's all about maximizing your return on investment.

And being able to give where you want.

For instance: We give away thousands of dollars each year to charities we've chosen. These expenses are completely deductible on our corporate tax returns.

And we pay less tax overall, as a result of our donations (since we have less money left).

But I think you have a really good point- -and one that folks like MJ might want to answer.

I'm going to copy your post to a separate thread, in the hopes it gets a greater response.

-Russ H.

What about personal tax? Can you choose to pay to a charity instead of getting taxed as an employee ?

 

[DeletedUser394]

What about personal tax? Can you choose to pay to a charity instead of getting taxed as an employee ?

Charitable writeoffs for me at least function as deductions after the fact.

Let's say you have $100k in income for the year. If you donated $10k to charities, then ~50% of that amount is eligible for a deduction.

So your taxable income is $95k even though you made $100k. You can literally push yourself into a lesser tax bracket.

Not sure what it is in the USA, probably similar.

It's much better for the biz to do the donating.

 

[100k]

I'd like to hear what @Russ H and @GlobalWealth think about giving to charities and how it can be used!

"What about personal tax? Can you choose to pay to a charity instead of getting taxed as an employee ?" Will you only be able to deduct 50% of what you donate on your taxes ? Like Richkid said.

Thanks

 

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[GlobalWealth]

I'd like to hear what @Russ H and @GlobalWealth think about giving to charities and how it can be used!

"What about personal tax? Can you choose to pay to a charity instead of getting taxed as an employee ?" Will you only be able to deduct 50% of what you donate on your taxes ? Like Richkid said.

Thanks

I only recommend charity if you truly believe in the beneficiaries and they are actually getting the benefit from it. Many large charities spend the vast majority of their income on salaries and fund raising (ironic isn't it). For example, the Red Cross execs make 7+ figures per year.

A better solution would be to establish a foundation that you control. You and your business can make tax deductible contributions to your foundation and you - as manager - can control where the money is spent.

 

[GlobalWealth]

Good topic, thanks Russ.

As some of you know I'm from Australia and we have different structures here, so please bear that in mind when you read this.

We set up a corporate structure before we bought our first investment property.

We set up a trust, a company for property trading, and the trust has a trustee.

Initially the trustee was my wife (and/or) myself as private individuals. We did that to keep costs down with setting up the structure. However it wasn't too long and we changed the trustee to be a corporate trustee (a company). We did this to strengthen the overall structure.

Also I was the sole director / company secretary of one of the companies and my wife was the sole director / company secretary of the other... the separation was for asset protection reasons.

After a few years we closed down the trading company because we no longer do property trading (vendor financing deals).

Aside from the property trading, all our investments (shares and buy & hold property) have always been bought through the trust. In addition to the asset protection, it gives us some more control over our taxes (minimizing them) since we can change how the net proceeds from the trust are dispersed from year to year.

Having the trust and the trading company (when we had it) allowed us to claim some expenses as business / investment related, to minimise our tax a little. These expenses haven't been anything substantial though.

You need to be very careful with this type of structure. A trust can easily be pierced if the settlor/grantor is perceived to have direct control. In the case mentioned above GreenHouses has control as he manages the corporate trustee. This is fine until it must be defended.

If the trust is US based, this structure would be very easy to pierce as it is clear GreenHouses has control.

A better solution would be to establish a company owned by the trust with a 3rd party trustee. Have the trustee hire you as manager of the operating company and derive your income from that company, but the trustee retains ultimate control.

**disclaimer. I own a trust company.

 

[Solrac]

This control aspect is huge. Thought this could use a bump.

 

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[Guest-5ty5s4]

Bump. Technically, a corporation is still something you "own," but the quote about owning vs. controlling is still a good concept to get someone to think this through better.