Get a tax deduction for donations from your small business
Lots of small business owners make charitable donations from their profits. And studies have shown that consumers like it when businesses give to good causes.
Here’s how you can “do good” and make sure it benefits your business at the same time:
Pick the right charity. The IRS has rules for what types of charities qualify as tax deductions. You may also want to think about choosing an organization that aligns with your business in some way. For example, if you own and operate a pet food store, choosing an animal-related charity could help get your customers involved.
Know the rules. Anything you donate (e.g., cash, property donations, expenses incurred while volunteering) can be deducted against your business’ annual tax liability. In general, the IRS limits the amount of contributions that can be deducted to 50% of adjusted gross income.
Donate by the end of the year. To qualify for deductions, your contributions need to be made by the end of the relevant tax year. You’ll then have to report those donations on Form 1040, Schedule A.
Track what you give. Keep records of everything you donate. That means receipts, mileage notes, and appraisals of any property you donate that’s worth more than $5,000. Most charitable organizations will give you a written statement for anything you donate. And be sure to hang on to any statements or receipts you receive as proof of your donation in case of an IRS audit.
*For more information, contact your tax advisor.
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