Ask the Tax Pro: Can I deduct Charitable Contributions for My Business?
Posted on 25. Mar, 2010 by Stefani in Ask the Tax Pro, Tax
The below question was asked by a taxpayer:
I’m the sole member of an LLC, can I take a charitable deduction on my business return for cash and services I provide to my church?
I get this question quite often. And like most things involving tax, the answer is yes and no. Charitable contributions of cash are deductible, but not on your Schedule C. Instead, they’re deductible on your Form 1040, Schedule A. This isn’t simply due to the fact that you’re an LLC. In fact, the only business entity that can deduct charitable contributions on their tax return is a C corporation. Every other entity, whether it’s an S Corporation, an LLC, or a partnership, has the amount contributed “flow through” to each member’s personal return.
I should add that most business owners confuse advertising expenses with charitable contributions of cash. Oftentimes, a business owner may “donate” cash to a local church or other charitable organization and, in turn, the business will get an ad placed on the organization’s website or in pamphlets. This would actually be considered advertising and not a charitable contribution since your business received something in return for your donation: advertising.
You can have a charitable contribution and a business deduction with the same transaction. The charitable contribution would be the amount that exceeded the value of the services or products you received. As an example, if you donate $500 to a religious organization, and you then receive ad space on their website that they normally sell for $200, that $200 would be a deduction on the business return as advertising. The $300 that exceed the value of what you were provided would be the charitable contribution that you would deduct on your Form 1040, Schedule A.
On the other hand, donations of time or services are never deductible. This is true even if you can easily value the time or services you provide.
