How will charitable contributions (on behalf of my business) impact my business's taxes?
Which types of charities can we donate to that will also allow us to receive a deduction? Are there certain types of businesses that are not eligible for this type of deduction? Are we also eligible to receive deductions based on the value of any services we perform for a charitable organization, or does this only apply to money donated directly to the organization?
If your business entity is a regular corporation (called a “C corp”), the charitable contributions (made on behalf of your business) will reduce your business's gross income thereby lowering your business taxes. The general rule is a charitable deduction is limited to a maximum of 10% of the Corp’s taxable income. In addition to the requirement that the deduction be a “gift” for use by specified donees (see Publication 526, Charitable Contributions; also see, Exempt Organizations at www.irs.gov/charities), the corporate charitable contribution must also meet certain rules concerning the FMV of the gift, including strict appraisal and record-keeping requirements. Also, no charitable deduction is allowed for a taxpayer's performance of services on behalf of a charity.
If you are a sole proprietor or a single-member LLC that elects to be treated as a sole proprietor / Disregarded Entity (DE), your business taxes are filed on Schedule C of your personal Form 1040. In this case, your business cannot make separate charitable contributions as the only way individuals can deduct charitable contributions is by filing Schedule A, whereby you must itemize your deductions to take these specific deductions.
If you’re a flow through corporation (a “S Corp”), the charitable contributions are not subject to the same 10% limit as C corporations. Each shareholder of an S corporation takes into account the shareholder's pro rata share of the S corporation's items of income, loss, deduction, or credit. Also, unlike the flexibility of the C corp, the S corp must report the contribution on its return for the year in which the contribution actually was made (see Rev. Rul. 2000-43). Thus, the charitable contribution deduction is not taken at the S corp level; instead, the individual shareholder takes his own charitable deduction by virtue of being allocated the deduction by the S corporation. That is, a S corporation shareholder deducts their share of the business's charitable donations as an itemized expense subject to the rules as described in Schedule A of form 1040.
It depends on the business. if it is a pass through entity, then the charitable payment will be transferred to the owner/partners via K-1. if the entity pays its own taxes, then the contribution is deductible for said business. Services are not typically considered tax deductible, but you can deduct the mileage to get to/from the charity location as well as any items that were used (i.e. printing flyers for the event using company paper and printers).
If your business is organized as a pass through entity (partnership, S corp, or LLC choosing to be taxed as one), then charitable contributions flow through to the individual owners/shareholders tax returns.
In other words, if a business entity doesn't pay taxes itself it won't get any charitable deductions.
There is never a deduction available for donation of services.
I think your answers can be found in the other replies BUT I'll re-cap.
1. No deduction for personal donated time
2. Make sure the charity has an IRS charitable designation
3. Business (C) corporations take deductions on their tax forms, while others (sole prop., "S" corp, partnerships, etc.) have the donation flow through to their personal return, which must itemize deductions.
4. You can deduct for car mileage on behalf of the charity and professional services that are billed and forgiven as an accepted donation by the charity.
They have to be real non profit charities. Not fund raises for sick friends. All businesses can make donations make sure they are from the business use business checks and if possible get receipts. If you do a service you can donate that service but you can not get paid for time. You did landscaping fine write a bill and then have the church acknowledge the work as a donation. You can write off volunteer miles for non profits. You can donate your service put a value on them to a charity auction. IRS has a good publication on charity IRS.gov will be helpful.
As I would tell my clients, if you have the money to ask this question then you have the money and an obligation to yourself to get a CPA. There is a reason that all the answers below are not identical and not everyone is a CPA. I would start with hiring an accountant or a firm so you can get an answer and not an opinion.
As for services, I think someone already said no services are deductible. Note the logic, the best you could do is donate the service you would bill them for and that only works if you report the billing as income first. Personally I can get credit for mileage in my car, parking and the like, maybe you have hard expenses that are deductible (if they are business expenses, it hardly matters if they are charitable).
Your best bet would be to consult a tax professional, certain contributions may not lower your over all tax base, where as others will. some types of groups are relatively easy to reach out to. IRS though we all just "love them to death", do have a listing of tax relief suggestions.
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