Can My Business Make a Deductible Donation to Charity?

Yes. However, the business owners contributing must itemize their deductions on their tax return to receive a tax benefit for the deduction. This is because charitable contributions are separately stated and passed through to the owners of a sole proprietor, single-member LLC, or pass-through entity such as an S corporation or partnership. Instead of deducting contributions as a general business expense, the contribution is reported as an itemized deduction on Schedule A of the owner’s tax return. To receive a tax benefit from itemizing your deductions, medical expenses, specific state and local taxes up to $10,000, mortgage interest, deductible investment interest expense, and charitable contributions must exceed your standard deduction.

Cash donations of less than $250

Reporting cash charitable donations is straightforward. To claim a write-off of less than $250, a taxpayer needs a written acknowledgment from the charity or a bank or credit card record documenting the amount and date.

Cash donations of $250 or more

If a donation is $250 or more, a written acknowledgment from the charitable organization is required. The acknowledgment must be received by the date the tax return reporting the contribution is filed or by the extended due date, whichever is earlier. It also must state whether any goods or services were provided in exchange for the contribution and, if so, an estimate of the fair market value (“FMV”) of the goods or services provided. The FMV of any goods or services received is not deductible.

Non-cash donations

Non-cash donations are allowed, but the rules differ depending on the property type. Generally, the deduction is limited to the cost of the donated property, not the FMV. However, if you have already deducted the cost as a business expense, a deduction for a charitable donation is generally not allowed. Additionally, as the dollar amount of the non-cash property increases, the support requirements get much more stringent and can require a formal appraisal. We recommend discussing any non-cash donation with an expert before donating.

IRS Publication 526 provides more details on this topic.