We’ve written about different types of charitable giving for individuals, but donating to charity from a small business is another aspect worth getting acquainted with if you own a business.
Reasons for Donating to Charity from a Small Business
There are a number of compelling reasons for your company to donate. Charitable giving:
- Positively affects a cause or community you care about
- Gets your brand name out there when you’re identified as a donor or sponsor
- Attracts consumers who like to support businesses that give back
- Helps establish a legacy for your company
- Improves employee morale and retention; people like working for a business that helps make change
- Offers tax benefits in many instances
Types of Small Business Charitable Giving
There are also many ways to give, such as:
- Writing a check to make a monetary contribution
- Donating a portion of sales
- Matching employee contributions
- Sponsoring events or teams
- Donating products, services, or professional skills for free or at a reduced price
- Having employees volunteer during work hours
- Allowing employees to exchange paid time off for charitable donations
Federal Tax Deductions for Charitable Donations
Generally speaking, donations made to 501(c)3 nonprofit organizations are tax-deductible. However, the deduction is not always simply equal to your total contribution.
Always consult your tax professional about claiming federal tax deductions for donating to charity from a small business. Claiming such deductions requires filing a Schedule A with your return, and if you’re claiming non-cash donations, you’ll also need to submit form 8283.
Remember to keep records of your donations. These may include canceled checks, credit card or bank statements, receipts, letters of acknowledgment from the organization, lists of gifted items, copies of signed-over vehicle titles, or other documentation.
It’s also important to note that not all types of charitable giving by a small business are tax deductible. For example, donated services usually are not; however, costs incurred by your business related to the donation (such as travel expenses or material costs) often are. Check with a tax professional before making a donation to be sure you understand whether and how it will benefit you from a tax standpoint.
