Charitable Contributions And The IRS: Quick Checklist

Charitable Contributions And The IRS: Quick Checklist

Businesses small and large around the country are major participants when it comes to charitable contributions. Not only does the business benefit from helping the less fortunate or special cause it is supporting but it also helps the business elevate its brand name into high esteem while in many cases earning a tax deduction. Many surveys find that a consumer will be more apt to buy a product or service from a company that gives back to the community. With this, there are also tax benefits that business may be entitled to. Here is a small checklist that businesses should review in order to obtain the most out of their charitable contributions.

Charitable contributions checklist

1. It is important to understand that not every contribution qualifies. It is critical to recognize an eligible charity which is usually a 501(c)(3), using the IRS search tool on

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2. Eligible donations include cash, supplies used to volunteer your services, donation of inventory, and sponsorships of a charity event. There are certain limitations for each donation such as not being able to deduct the fair market value of your volunteered services. (A doctor who may charge $300/hr cannot volunteer 1 hour and deduct $300). However you are entitled to deduct the mileage and supplies used for the volunteered services.

3. Most of the time the taxpayer, if the donation is paid in full by the end of the tax year, will be able to deduct their charitable contribution on form 1040 – Schedule A. What this means is that even though the business itself may not be able to take the deduction directly, the taxpayer will ultimately get the deduction when they file their personal tax returns at the end of the year (the deduction will be shown on the K-1 at year end). However, the IRS limits the amount of charitable donations that can be considered tax-deductible to 50 percent of your adjusted gross income

The IRS says:

Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. However, corporations (other than S corporations) can deduct charitable contributions on their [personal] income tax returns, subject to limitations. See the Instructions for Form 1120 for more information. Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040) [on their personal tax return].

(Source: IRS Publication 535: Business Expenses)

4. Always keep back up records. In case you are ever audited the IRS will want substantial documentation to prove these contributions were made in the business and personal name.

To conclude, before make any donation one should research the charity and use the IRS guidelines as a roadmap in order to ensure they will be receiving the max tax deduction.

More about Jordan Niefeld:

Jordan works for Gerstle Rosen & Goldenberg, P.A.,  which has maintained its reputation for excellence and client satisfaction in the areas of accounting, auditing, taxation, divorce and fraud forensic, business consulting, governmental, not-for-profit, litigation support, other real estate and construction accounting, as well as federal, state and local governmental accounting, auditing, and consulting services.

Gerstle Rosen & Goldenberg, P.A. is one for the most progressive accounting practices in South Florida providing a wide range of diversified services to corporate, small business, individual clients, condominium and home owners associations and non-profit organizations.


Charitable Contributions and Businesses, by Jordan Niefeld, CPA

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