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Jean   Murray

Charitable Donations and Business Taxes This Holiday Season

By November 29, 2012

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Just like other holiday traditions, charities are everywhere this season, and with Hurricane Sandy and other disasters affecting many more people, you may feel the need more help. As you consider making donations to charities before the end of 2012, consider:

Is the Charity IRS-Approved? First find out if your donations to this specific charity will be tax deductible.  Only contributions to charities listed as "qualified organizations" by the IRS are deductible. Consult IRS Publication 78 for a list of qualified organizations or search online at the IRS home page. If you have a question about a charity's status, ask them to send you a copy of the letter they received from the IRS recognizing them as a tax-exempt (501c3) organization.

What are you donating? You can donate cash or "in-kind" items (property and equipment). You can also donate mileage and other travel expenses incurred in relation to working for a charitable organization, based on the IRS-designated standard mileage rate for charitable work.

Read more about donating business assets or cash to a charity.

What kind of business do you own?

  • Sole proprietor: If your business is tied to your personal tax return, your donations are really personal ones, not business donations.  They are not deductible business expenses, but they are deductible to you personally.
  • Corporation: A corporation is a separate business entity and it can make deductible donations to charity.
  • Partnership or S Corporation: Donations from a partnership or S corporation are too complicated to discuss fully here. Read this article about charitable donations from businesses for more information on how partnership donations are treated as deductible business expenses.
  • LLC: A single-member LLC is treated for tax purposes like a sole proprietorship, and a multiple-member LLC is treated like a partnership.  See the relevant bullet point above for more information.

Read more about Your Business and Charitable Donations

Disclaimer: Remember that my purpose is to provide you with general information to get you started learning about a specific tax subject. I am not a tax adviser, CPA or attorney. If you have questions about the deductibility of charitable contributions, check with your tax adviser.

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