Does a Company Need to Be a 501(c)(3) to Be a Charitable Tax Deduction?

Nashua, NH Resident Has Concerns

A 501(c)(3) organization is one that is recognized by the federal law as a non-profit.  These organizations are recognized by the IRS as being tax-exempt with primary activities being of a charitable nature.  To be able to deduct charitable contributions on your taxes, organizations much fall under section 501(c)(3).  This is also a good way to affirm whether the organization is indeed a charity.

A Nashua resident was planning the remainder of her 2020 giving.  Concerned about the charities that she was donating to, she began to investigate whether they were 501(c)(3).

Not All Non-Profits are Qualifying Charitable Organizations

To qualify as a charity, the organization must apply for this status with the IRS.  Dependent on their mission and organizational structure, they can fall under section 501(c)(3).  This allows the organization to receive tax-deductible donations.  With the growing popularity of GoFund Me and other individual fundraising, it is important to note that these types of contributions do not qualify as tax-deductible donations for the giver. 

Political donations, whether to a candidate or committee, are also not considered charitable donations.  These contributions are not able to deducted from your tax bill at the end of the year.

Gifts that Benefit You are Not Tax Deductible

Many charities offer fundraising opportunities in the form of events, giveaways or raffles.  In this scenario, where you are receiving something from the charity in exchange for your monetary donation, this is not considered tax-deductible by the IRS.  If you are purchasing items for a charity fundraiser and expenses include additional things such as wrapping paper or gift boxes, only the fair market value of the product can be deducted.

The most important thing to keep in mind when making charitable contributions is to document all of the items, whether money or product.  The Nashua resident is confident that she can now find the right charities to donate to this year and going forward.