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Get Charitable this #GivingTuesday—and Get Tax Deductions!

Posted by Melissa Hollis to Taxes

Photo of heart hands illustrates article on Giving Tuesday and charitable tax deductions for small businesses.

No doubt about it, the holiday season is officially underway, with #BlackFriday, #SmallBusinessSaturday, and #CyberMonday raking in billions of dollars for businesses. Now that you’re all stocked up on discount TVs, it might be time to think about giving back.

Not to fear, we have a hashtag for that too: Yep, it’s #GivingTuesday.


Giving Tuesday has become a global movement, raising $116.7 million in 2015 alone (more than doubling the $45.68 million raised in 2014). But we can do better!

 

Everyone can participate! If you own a small business, this is a great time to engage your employees and customers and make a statement that healthier, cleaner, more equitable communities benefit everyone, including businesses. GivingTuesday.org even has ideas and examples specifically for small businesses that you can use for inspiration for your own campaign.

 

As a small businesses, this is an excellent opportunity to align your marketing and philanthropic goals—and make the most of end-of-year tax deductions. If you’re just thinking about this now, don’t worry: You have through the end of the year to do good, involve your employees, and lower your taxable income for 2017.

 

Two #GivingTuesday Strategies for Small Businesses 

1. Know your employee culture and organize your end-of-year giving strategy accordingly 

If you have a competitive crew, you can create a contest for just about anything: cans of food, toys for kids, coats for veterans, blankets for shelters, funds raised for a hospital. Depending on your company size, individuals, teams, departments, or locations can compete against each other and for the greater good. Remember inDinero employees volunteer at Wildwood Farm Animal Sanctuaryto make a company donation at the end to reap those tax benefits and show employees you’re invested too.

 

If you have a bunch of team players, consider spending a few hours volunteering together at a local shelter, school, or food bank. Give a company donation at the end of your volunteer day.

 

If your company comprises loan wolves, make it easy for your individual employees to donate to a charity of their choice, and then match their contributions up to a certain percentage or dollar amount. Your employees will feel supported without the stress of a contest or team volunteer day.

 

Combining elements of all these strategies makes it easy for everyone to give. Whatever you do, remember to involve your employees in the decision and publicize your efforts on social media, your website, emails, etc. Potential customers and employees want to see your company cares about the communities that keep it in business.


2. Let your customers dictate your giving.

The customer is always right, right? Send out a survey to find out what matters most to your customers or clients—which causes or specific organizations excite them? And then give accordingly! You don’t have to pick just one organization, but make the results public so people can see how the votes landed.

 

What Small Businesses Need to Claim Charitable Tax Deductions

receipt-basket-pexels-photo-196639-1200x600.jpeg 

Small businesses have dozens and dozens of options for tax deductions, but charitable giving is the only one that creates that much goodwill among your employees, customers, and the community. Don’t let those Giving Tuesday good vibes distract you, though. There are a few things you need to have to claim your tax deduction.

 

1. Save your receipts

This is item number one for any tax deduction. If you get audited, you’ll need evidence that you earned the deductions you claimed. So, unless you’re dropping change into a bellringer’s bucket, always ask for a receipt. The IRS specifically requires a bank record, payroll deduction records, or written communication with the name of the organization and the date and amount of the contribution. For text message donations, your phone bill will do the trick if it shows the name of the receiving organization, the date of the contribution, and the amount given.

 

2. Know your limits

C corporations can deduct donations up to 10% of their taxable income per year. So, if your C Corp netted $1 million dollars in 2017, your company could donate up to $100,000 come tax time. If your C Corp donates more than that, just carry over the excess to next year and deduct it then.

 

If your small business is a sole proprietorship, partnership, LLC, or S corp, each partner pays taxes separately. The general rule is that individuals can’t donate more than 50% of their adjusted gross income to charity, though stricter rules apply to noncash donations.

 

Regardless of your business entity, save your receipts and give them to your accountant at the end of the year.

 

3. Services aren’t deductible

Earlier, I mentioned group volunteer days at a soup kitchen or food bank. Those events have the power to create bonds, a sense of purpose, and loyalty. You can’t put a pricetag on those things—but you can’t deduct them either. The IRS won’t allow you to deduct your time or services provided, but you can deduct cash, stock, and property, including real estate, vehicles, clothing, and appliances.

 

4. Donate to a qualifying charity

There are thousands of qualifying charities that would be happy to put your donations to good use. But certain groups don’t qualify, including lobbying groups, labor unions, chambers of commerce, civic or social clubs, homeowners’ associations, and political candidates or organizations. You also can’t deduct the value of blood that you donate.

 

So what does qualify? Most religious, environmental, animal, educational, and health-related charities. Just to be safe, check the status of your favorite charity with the IRS.

 

What are you doing for Giving Tuesday? Let us know on Twitter, and be sure to use the hashtag #GivingTuesday.

 

Entrepreneur's Guide to Accounting & Tax Filing

About the author
“Melissa

Melissa Hollis

Melissa Hollis is a content marketer and lover of all things West Coast. She enjoys waking up every day and getting the chance to rethink the obvious and enable the dreams of aspiring entrepreneurs.


Disclaimer: The inDinero blog provides general information about tax, accounting, and business-related topics. It is not intended to provide professional advice. Read more in our Terms of Use.

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