Combine Social Cause and Business With Your Own Charity

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Create your own 501 (c)(3) to support your charitable passion while building a future for yourself. Here is what one of my clients did to prepare for her dreams while she sheltered her income with great deductions.

A new client with a very high paying job in the tech industry was looking for a way out.

“What do you want to do?”, I asked.

She was buying up real estate to provide passive cash flow when she left her job. But it seemed like her heart wasn’t really into it. I understand that. Real estate can be a great way to provide passive income, appreciation and tax breaks, but not everyone loves it.

She thought for a second and then blurted out, “I want to help the homeless problem in the US.”

She then went on to tell me about the details for a master plan to provide shelter and counseling for some of the most disenfranchised people in our society. It was a workable plan and it was clear she had a lot of passion.

And, it was something that could give her a tax break right now. Normally, we talk about the tax breaks for real estate but because she had another job and her income was high, she wasn’t able to take advantage of the paper losses from real estate.

Charitable donations, though. That was something that she could deduct.

She set up her own non-profit with the 501 (c) (3) designation and began funding it with deductible donations. Some of the money went to existing programs. Some of it was saved up for some bigger projects.

All of the donations were deductible.

At some point, she plans to quit her tech job and go to work for her charity. At that point, her income will be much lower but she plans to live on $50,000 or less per year. It’ll be taxable income for her, but the tax she will have to pay then will be at a lower tax rate. That rate will even be much less than the tax rate she got after the benefit of the donation made when her income was much higher.

In a way, it’s like paying for a future annuity. In this case, she’s building toward her dreams of helping others.

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  1. Sophia Katt says:

    What is her/your plan for dealing with the 501 3 C public support requirement?

  2. Diane Kennedy says:

    In her case, she will be supporting homeless projects in the US. She will eventually concentrate in just one area, but for now she’s making contributions to support projects that she sees are doing good work.

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