Charitable Giving 101 for Business

Charitable Giving 101 for Business

Giving to charity is something most business owners do.  $5 here and there for a raffle ticket, sponsorship of a local sports team, and those dinner auction ticket receipts often find their way to my bookkeeping desk coded for “charitable contribution” or “donation”.  The problem is that lots of these are not actually charitable contributions or donations at all.  So here are a few things most business owners should now about giving to charity:

1.  It is only deductible if the charity is domestic. If you want to help starving children in Africa or earthquake relief in Haiti try to give to a U.S. charity such as the Red Cross for example.

2. You can not claim a deduction for a charitable contribution if you get something of tangible value.  For example if you buy a t-shirt for $5 that is valued at $5 then you are not making a charitable contribution you are buying a t-shirt.  If you pay $150 and get a T-Shirt valued at $5 then you have made a $145 donation.  Dinner auction or event tickets?  There should be a value and charitable contribution amount somewhere on the ticket or on the invitation.  If not you need to contact the organization because chances are that the event ticket isn’t 100% deductible.

3. You can’t record a donation for your time.  As valuable as it is we can’t deduct it on our taxes.  You also can’t deduct your creations.  If an artist donates a painting valued at ten thousand dollars to a charity auction they can only take a tax deduction for the cost of the canvas and paints nothing more.

4. You must maintain a record of the contribution that includes:

  • Name of the organization
  • Date of the contribution
  • Amount of the contribution

5. When you give goods to a charitable organization your can deduct the value of the goods.  If you give a case of wine for an event from your stock be sure to save the letter of recognition from the organization.  There are additional tax forms for non-cash contributions that exceed $500 so be sure to alert your accountant if this pertains to you.   If the non-cash contributions’ value exceeds $5000 you need a qualified appraisal.

6. Pledges don’t count as deductions so if you need the write off be sure to fulfill your pledges before the end of the fiscal year.

7. The following payments are not tax deductible as charitable contributions even if they are tax exempt organizations:

  • Political parties, political campaigns, or political action committees.
  • Contributions given to individual people.
  • Fees or dues paid to professional associations.
  • Contributions to labor unions, chambers of commerce, or business associations.
  • Contributions to for-profit schools and hospitals.
  • Contributions to foreign governments.
  • Fines or penalties paid to local or state governments.





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