Tax Deductions for Charitable Contributions

(Another piece from our Self-Employed Tax Guide)

Through charitable donations, your business could benefit by gaining tax deductions and also earning good media coverage. Let’s study this a bit further.

Goods and servicesA donation to a second-hand store such as Value Village above $250, ought to qualify as a substantial donation. By acquiring a receipt from the non-profit organization you are going to have the supporting documents to confirm the acceptance of goods and as a result merit a tax break. If your business has an excess of a good, you may elect to donate the exess item. In doing so, you will then acquire a tax advantage, you’ll clear space for different products, and show (that is if you make public the contribution) that your business is a compassionate organization that provides for those of us that are in need.

Another example would be for services that you offer to the public. This approach is a way to perform community service and also acquire a tax deduction as well. The United Way and other such organizations often host events where low-income and indigent folks gather to receive, en masse, services that they could not afford or have access to. Your assistance would be classified as a charitable contribution at fair market value and the organization would give you a receipt declaring the value associated with these services for tax purposes. On your side, this receipt as well as all of the materials utilized could be considered write offs. Please make note these events afford such a large gathering of people that by means of word of mouth and direct exposure your small business will possibly be seen by numerous individuals. Similar examples might include donating scrap from your finished product. This could be excess vegetables, or a product which just doesn’t fulfill company specifications and consequently could not be sold. Once again fair market value regulations apply.

Cash Contributions

In compliance with internal revenue service policies, a receipt is wanted for any single donation over $250 so as to claim the tax deduction. This type of contribution is popular and is the easiest to maintain. One means is planned giving. This can be established to regularly occur. As a business owner, this is a smart way to plan your annual charitable deduction and maintain your cashflow reserves, arriving a predictable outcomes. These are just a few instances of how your small business can benefit the community, improve your public image, and get a tax break in addition. Please remember whenever possible, consult your tax preparer for directions on the Schedule C form because limitations apply to this type of deduction. The above details can be found in PUB 526 and guidelines for disclosure in Publication 1771.