Tax Benefits
Tax Benefits for Your Business
One of the most immediate benefits of donating to a non-profit organization in the U.S. is the opportunity for tax deductions. The IRS allows businesses to deduct charitable contributions from their taxable income, which can significantly reduce the amount of tax your company owes. Whether you’re a small business or a large corporation, these deductions can make a noticeable difference during tax season.
Here are some key aspects to keep in mind:
Contributions to 501(c)(3) organizations are tax-deductible: A 501(c)(3) is a specific tax-exempt status given by the IRS to qualifying non-profits. Donating to these organizations allows you to claim deductions on your federal taxes. However, it's important to ensure that the organization is registered as a 501(c)(3); otherwise, you won’t be eligible for the deduction.
You can deduct the fair market value of donated goods: If you donate goods, such as equipment, supplies, or even real estate, you can deduct the fair market value of these items. This is the price that the goods would fetch on the open market. Be sure to get an accurate valuation to claim the maximum deduction possible, and keep any relevant receipts or documentation.
Cash donations are fully deductible up to a limit: Cash contributions, whether given through direct donations, sponsorships, or grant funding, can be deducted up to 25% of your business’s taxable income. If your donations exceed this amount, you can carry over the excess to future tax years. This flexibility allows for long-term planning and the potential to continue benefiting from your contributions down the road.
What to Know:
Be sure to obtain a written acknowledgment from the non-profit for donations over $250, which you’ll need when filing your taxes.
Make sure your contributions are properly documented, whether they’re in cash or in-kind goods, to avoid any issues during tax season.
If your business is incorporated, your corporate contributions are deductible up to 10% of your taxable income. Any excess can also be carried over for up to five years.