Can a Business Deduct Charitable Contributions on Their Taxes?

Goffstown, NH Business Owner Looks for Clarification

Only businesses classified as corporations can deduct charitable donations on their business tax return.  These contributions to charity cannot be more than 60% of the adjusted gross income.  Business owners for other types, including sole proprietorships and partnerships, can deduct charitable contributions on their own personal tax return.

A business owner in Goffstown was wondering if it would be more advantageous for her to make charitable donations through her business.  For advice on the matter, she contacted the team at Merrimack Tax Associates.

Charitable Deductions for Corporations

Corporations are the only business entity that can deduct charitable contributions on the business’ tax return.  These can include both cash and non-cash donations.  Non-cash items might include office furniture, computers, and other equipment that had been purchased and used by the business.  If these non-cash deductions total over $500 a Form 8283 will need to be submitted with the tax return.  Mileage and travel expenses incurred by the business for the purpose of supporting a charity can also be deducted on your business tax return using the standard mileage rate.

Time spent volunteering and providing services for an organization is not considered a charitable deduction.  Any time that you receive something for your contribution to the charity cannot have these expenses deducted.  This might include a gift, meal, or ticket to a local event.  Upon receiving some tangible benefit from the charitable donation, this is no longer deductible.

Small Business Charitable Deduction

Sole proprietors and partnerships can still take advantage of tax deductions for charitable giving.  This just needs to be reported under their personal tax return when filing in conjunction with the business.  This will be recorded on Form 1040, schedule A.  For small business owners there is a limit to the amount of charitable giving deduction that you are eligible for.  This is typically 60% of your adjusted gross income but may vary.  This does not apply to non-cash charitable contributions.

The business owner in Goffstown now has a better understanding of how to maximize his business’ charitable contributions, which will save him money going forward.