How A Charitable Donation Can Help Your Business


Giving to Giving Center and other non-profit organizations is a great way for your small business to build goodwill in the community and is often part of an overall public relations strategy. For many businesses, making charitable donations in cash, property and even time can be a benefit when it comes time to file your business taxes. Many types of contributions are tax-deductible. Though, there are limitations on these contributions and processes to follow in order to comply with strict tax laws.

Qualifying Donations

The IRS recognizes both cash and non-cash contributions from businesses. Non-cash donations can be property, goods and inventory. You also can deduct expenses related to volunteering for a qualified charitable event or service project. This doesn’t include the value of the time you spent but can cover gas and mileage required to attend an event, along with supplies donated to the cause. Often, charitable donations can be made in exchange for something of value. In that case, only the amount of the donation above the value of the good or service received is tax-deductible.

Qualifying Organizations

In order to fully utilize the charitable donation deduction, your business must give to organizations recognized by the IRS as 501(c)(3) nonprofit organization like Giving Center. This means Giving Center is able to receive tax-exempt donations. Keep in mind, gifts and donations to political organizations, parties or candidates, or to specific individuals, aren’t recognized by the IRS as tax-deductible donations. You are able to find out if a company qualifies by asking to see its letter from the IRS naming it a tax-exempt organization. You also can search for qualifying organizations by using the IRS Exempt Organizations Search tool.

Limitations

While individuals donating to Giving Center, a qualifying 501(c)(3) organization, are allowed to deduct up to 50% of their adjusted gross income as charitable contributions, businesses are limited to 10% of their taxable income. Many businesses often opt to donate the maximum amount allowed each year to Giving Center.

Record Keeping

Record retention and bookkeeping is very important for businesses that wish to deduct charitable contributions. You must keep the proper paperwork and all transactions. If your business makes a donation of less than $250, a receipt written out by the Giving Center is sufficient, as does a canceled check or credit card or bank record. For cash donations above $250, Giving Center will give you an official receipt. There is no additional IRS form to fill out for a cash donation.
You will also get a qualifying receipt from Giving Center for all non-cash donations. To deduct this type of donation, you must appraise the fair-market value of the items and use that amount as your deduction. If the value is greater than $500, you will need the IRS Form 8283 when you file your taxes. If your donation is worth more than $5,000, you also need a written appraisal of the goods and have the appraiser sign Section B of Form 8283.

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