PrintIf you want to get the maximum tax benefits when making charitable contributions, you should know a few basic rules.
- 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 in the IRS home page.
- Contributions of more than $250 require a letter of receipt from the qualified organization. For contributions of less than $250, a canceled check is sufficient.
- In general, donations of property can be deducted for their fair market value at the time of the contribution. You cannot deduct a contribution that has already been written off as a depreciated asset.
- You cannot deduct the value of time or services that you volunteer.
- You cannot deduct the part of a contribution that benefits you. If you receive a gift in exchange for a charitable donation, for example, you can deduct only the amount of the contribution that exceeds the value of the gift.
- In general, you can deduct contributions only in the year you make them. Pledged contributions cannot be deducted until they are actually paid.
Unless your business is a C corporation, charitable contributions typically "flow through" the business and are claimed as deductions on the individual tax returns of the shareholders of the company. That's true whether you're running a sole proprietorship, a partnership, a limited liability corporation, or an S corporation. Get more information on structuring your business.
The following resources can help you understand tax deductions for charitable donations:
- The Basics of Charitable Contributions, in Intuit online
- Tips on deducting charitable contributions, in Better Business Bureau Online
- IRS Publication 526: Charitable Deductions, in the IRS
- Organizations that qualify to receive charitable deductions, in the IRS
- Worksheet for limits on deductions, in the IRS
