Charitable Giving Can Also Improve Employee Morale
By bringing workers together to support causes outside of their work life, employees can feel good about their contributions.
Picking a charity that’s tied in with your small business’s goals can make the charitable giving more meaningful. If you’re in the restaurant industry, work with a charity that collects food for the homeless. If you can’t find a charity that’s appropriate for your small business, pick one that you and your employees are passionate about.
Investigate the Organization You Want to Help With Charity Navigator
Make sure it’s legitimate and find out how much of donations go to administrative, marketing and other overhead costs. The IRS has a search tool to look up tax-exempt organizations.
Tax Deductions
Most charities or non-profits operate as tax-exempt 501(c)(3) organizations and donations to them are tax deductible. Such donations include cash, volunteered services, sponsorship of local charity events or the donation of inventory or services.
Charitable contributions can qualify as tax deductions against a business’s annual tax liability. Generally, up to 50 percent of adjusted gross income can be deducted. Be sure to check with your tax professional on which charity contributions can be deducted.
Cash Contributions are Deductible
If they aren’t set aside for use by a specific person, they can be deducted. The contribution must be made within the current tax year to be eligible for the deduction, regardless of the accounting method your small business uses.
Property or inventory donations must be assessed at their fair market value. Form 8283 for non-cash charitable contributions must be used for donations over $500.
Volunteering
The value of your service can’t be deducted, but incurred expenses such as the cost of buying a uniform or hosting a fundraising party can be.
If you get something in return for your donation you can only deduct the amount of your contribution that’s over the value of the item. For example, if you have the winning bid at a charity auction for a prize valued at $200 and you bid $500, you can deduct the difference of $300.
Be Sure to Keep Written Records of Your Donations
Most charities will provide you with a written statement. According to the IRS, an organization must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods and services.
Another thing to keep in mind with charitable giving for your small business is that charities don’t just need donations at the end of the year when people are often thinking of them. Food banks, for example, have people to feed every day of the year. Helping such organizations throughout the year can not only help the charity, but keep your small business from hurrying at the end of the year to figure out its charitable giving for tax deduction purposes.
