Maximize Your Tax Deductions With A Nonprofit-501 c3 (Nonprofit Tax Information Get BIG DEDUCTIONS!)

Summary

In this informative video, Toby Mathis, a founder of Anderson Law Group, explores the strategic use of 501(c)(3) nonprofits for tax savings and asset protection. He explains the concept of nonprofits, their legal structure, and how they can be utilized for societal benefits, with examples from education to housing. Mathis highlights the tax exemptions available to nonprofits and discusses the process of obtaining IRS approval. He also emphasizes the potential for significant tax deductions through donations to these organizations, which can be a powerful tool for both individuals and businesses in tax planning and asset protection.

Takeaways

• 📜 Nonprofits, particularly 501(c)(3) organizations, can be used for tax savings and asset protection.
• 🏦 A 501(c)(3) is a type of organization that includes religious, educational, and charitable entities, offering tax deductions for donations.
• 🏢 Nonprofits are structured as corporations with bylaws and directors but without shareholders, focusing on community benefit instead of individual profit.
• 💼 The IRS views 501(c)(3)s as exempt organizations, which generally means they are not subject to federal or state taxes, including real estate and sales taxes.
• 📝 Setting up a nonprofit involves creating bylaws, submitting an application to the IRS (Form 1023), and potentially waiting for approval, which can take from six months to over a year.
• 💡 The timing of setting up a nonprofit can be crucial for tax planning, as it can relate back to the date of corporation setup, allowing for immediate tax benefits.
• 💼 Businesses, including S corporations, have additional tax-saving options, such as paying employees and contributing to retirement plans like 401Ks.
• 🔄 The concept of income shifting is introduced, where money is directed to entities like 501(c)(3)s or retirement plans to reduce personal tax liability.
• 💰 Individuals can write off donations to 501(c)(3)s up to 60% of their adjusted gross income, a significant tax-saving opportunity.
• 🏠 Nonprofits can also accept donations of property, with deductions based on fair market value, capped at 30% of the donor's adjusted gross income.
• 🛡️ Nonprofits offer asset protection as they cannot be seized by creditors due to the lack of ownership by any individual.
• 🏡 The script suggests that rental properties could potentially be donated to nonprofits, leading to tax deductions and potential real estate tax abatements.

Q & A

What is the main topic discussed by Toby Mathis in the video script?

The main topic discussed by Toby Mathis is how to use a nonprofit organization, specifically a 501(c)(3), for maximizing tax savings and asset protection.

What does the term '501(c)(3)' refer to in the context of the script?

The term '501(c)(3)' refers to a section of the U.S. Internal Revenue Code that covers exempt organizations, specifically those that are charitable, religious, educational, and other organizations that benefit society.

What are some examples of organizations that might be classified as 501(c)(3)s?

Examples of 501(c)(3) organizations include hospitals, educational institutions like Harvard, the United Way, the American Red Cross, and previously, the NFL.

How does Toby Mathis differentiate between a for-profit corporation and a 501(c)(3) nonprofit organization?

Toby Mathis explains that the main difference is that a for-profit corporation is created to profit individuals, such as shareholders, while a 501(c)(3) is created for community benefit and has no shareholders, only directors.

What is the purpose of submitting bylaws and other documents to the IRS for a 501(c)(3)?

The purpose of submitting bylaws and other documents to the IRS is to apply for tax-exempt status, which allows the nonprofit to avoid paying federal taxes.

What is the form number that is typically used to apply for tax exemption for a 501(c)(3)?

The form number used to apply for tax exemption for a 501(c)(3) is Form 1023.

What is the significance of the timing when setting up a 501(c)(3) for tax planning purposes?

The timing is significant because if a 501(c)(3) is set up and funded during the year, the tax benefits can be applied retroactively to the date the corporation was established, which can be advantageous for year-end tax planning.

What is the maximum percentage of adjusted gross income (AGI) that can be deducted when donating to a 501(c)(3)?

As of 2018, donors can write off up to 60% of their AGI when donating cash to a 501(c)(3), and up to 30% when donating long-term property.

How does the concept of income shifting relate to tax planning with a 501(c)(3)?

Income shifting involves redirecting income to an entity that does not have to pay taxes on it, such as a 501(c)(3) or a retirement plan like a 401K, thereby reducing the overall tax liability.

What is the benefit of asset protection when using a 501(c)(3)?

The benefit of asset protection with a 501(c)(3) is that since no one owns the organization, its assets cannot be taken away by creditors or through legal action, providing a safeguard for the assets.

What is the carryforward period for unused charitable contributions if they exceed the AGI limits?

The carryforward period for unused charitable contributions that exceed the AGI limits is about six years.