Working with Charitable Contributions

Explore small business charitable donations to foster goodwill

As a small business owner, your responsibility is not only to yourself and your employees, but to your community, and making tax-free charitable contributions can help here. Using some of your profits to help non-profit organizations reduces your gross income and makes you look good to your customers and other potential clients.

However, working with charitable contributions can be confusing. You may wonder which charities qualify and how you can apply a tax free contribution to your books. Once you get the hang of it, making these contributions won't seem tricky at all. Consider the following tips for making a business charitable donation:

1. Make a single charitable gift. This can be done more than once over the course of your fiscal year, and you can deduct it from your books.

2. Sponsor a non-profit. This can be ongoing or just for a single event. This type of charitable contribution can really get your name out in the community.

3. Write off any allowable gifts and sponsorships. While donating this money is helping the non-profit, you want to make sure it helps your business as well.

Start out with simple charitable gifts

Making a single or repeating gift to a charity is the most basic way you can support a cause. Many charities will give you a plaque or letter of appreciation to display at your business and also mention you in any type of newsletter they put out. If the donation is large enough, you may even get some kind of recognition at the facility, like your logo put up or an engraving on a plaque in the lobby. Most gifts are deductible as far as taxes are concerned.
Internal Revenue Service to see what kinds of charitable donations may be written off.

Move up to charitable contributions via sponsorships

Corporate sponsorship can give you some great advertising and expand your community's knowledge of your business. By lending your name to a cause you support, you not only enhance the coffers of that charity, you are telling the public that you care about a cause and are willing to donate money or time to help out. Examples include sponsoring a hole at a charity golf tournament, a pet at an animal rescue, or even giving a product or service for a silent auction. This type of giving is tax-deductible as well.

Ensure that your accounting for charitable contributions is spot-on

Remember that generally, only 50% of your adjusted gross income can be deducted for charitable purposes. If you're getting advertising out of the gift or sponsorship, the classification of the gift as a business charitable contribution may not be so clear. When in doubt, seek advice from an accountant or other tax professional.

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