Businesses might have seen some tax advantages occur with the tax law changes that took effect in 2018, but one particular area that was cut back significantly was business donations to charity. Regular small businesses such as sole proprietorships, partnerships and similar were stripped of the ability to effectively deduct charitable donations. However, traditional corporations and S corporations were not. These more advanced forms of business presence can still donate and enjoy a valuable tax benefit from doing so, even in 2021.
Yes. For non-corporate businesses, the income is ultimately passed on to the individual owner and finally taxed on the personal income tax side. The recent tax changes narrowed deductions for charity donations to only those made by the individual and reported on personal income tax returns. Given the increase in the standard deduction, pursuing the charitable tax deduction as an individual only makes sense when itemizing deductions is worth more than the standard amount.
Yes! Corporations act as their own entity and pay taxes accordingly. In this regard, the corporation can take advantage of the charitable donation directly versus through its employees like above. For the S corporation, the contribution to a charity is capped at $250 if general. A higher amount has to be documented with a written confirmation of the charity, including a verified estimate of the goods or services provided. Further, the charity itself has to meet specific criteria, noted below.
For the corporation, a similar charitable contribution benefit exists as well, which also has to be documented accordingly per IRS rules.
Regarding the charity receiving the funds from a corporation-type business, that organization has to meet what the IRS defines as “qualified.” This definition is often known as the 501c3 label associated with qualified charities and non-profits. Generally, it applies to recognized churches or non-profits that have formally applied to the IRS and been approved as a qualified charity.
Working poor charities are many, and a large number are qualified by the IRS, making them great candidates for corporate help. What they are able to pull in goes extremely far, benefiting large numbers in their communities. The funding typically goes primarily to programs, as many of the volunteer areas by such organizations are religious (34%), educational (26%), social services (14%) or health-oriented (7.3%). Paz de Cristo is a prime example, dedicated to boosting communities and social justice. By directing corporate help to Paz de Cristo, a company is achieving the dual benefits of helping faith-based supporters and making their community strong. Give today; it makes a huge difference.