Year End Charity Donation Benefits, What You Need To Know

As an entrepreneur, business owner or investor, it is important to ask your CPA before the year’s end about what your options are for donating to charity. When donating to charity, you can make a meaningful impact on the world and save big on taxes — as long as you know how to legally allocate your contributions. Look very closely at your bottom line, and ask your tax-preparer these key questions about what to donate, how to make a donation and what documentation is required in order to maximize your tax deduction.

1. What organizations qualify for charity donations?

Check with your CPA before making any major contribution to a charity to make sure they qualify. The IRS lays out a specific set of rules you must fallow in order to be able to deduct donations. One of them is that you must donate to a nonprofit 501(c)(3), like Giving Center, or spear heading programs like Computers with Causes or Aircraft Donation.

2. How does a business entity impact charity donations?

There is a difference between C corporations and S corporations for charity deductions. A C corporation is only able to deduct 10 % of its income. In contrast, an owner of a S corporation may deduct charity donations, as long as they don’t take the standard income-tax deduction, up to 60% of their adjusted gross income (AGI) for a cash donation and up to 30% for non-cash donations.

3. May I deduct equipment, inventory and property donations?

As a business owner, you may deduct desks, computers or other types of equipment based on their fair-market value. For expensive items such as jewelry, collectibles and real estate, you might need a written appraisal. When you claim in excess of $5,000 for donated property, the IRS requires a qualified appraisal and Form 8283. Don’t wait-ask your CPA for insights on how to best calculate this value.

4. Can I deduct volunteer time for employees?

If employees volunteer time to a charity that your organization supports during a work day, your company might be able to deduct their salary, benefits and expenses for time volunteered. Ask your CPA for help on how to accurately document these types of events and your donations.

5. What is the best way to donate stock to charity?

As always, ask your CPA what you need to do to transfer stock directly to a nonprofit as opposed to selling it to avoid capital gains. You eliminate the gains on stock while getting a deduction for the full value of the stock.

Ask your CPA what documentation is required for the different types of donations. Keep in mind, if it is less than $250, a cancelled check or bank statement that shows your cash donation will be sufficient. However, for monetary gifts that exceed this amount, you will need a record in writing such as a letter.

Remember, certain charity contributions receive state tax credits in most states, which gives both a credit on state taxes and a tax deduction on federal taxes. Next year, don’t wait to make these proactive charitable donations at year-end only. Giving should be a regular part of your monthly budget so that you are able to be even more strategic with both your tax planning and contributions.