Can You Deduct Charitable Contributions as a Business Expense?

As business owners, we all want to make sure we are maximizing our deductions. However, it's more important to do it correctly. A common error I see on business tax returns is deducting charitable contributions.

First let's talk about business expenses...

What is a business expense?

A business expense must be both ordinary and necessary. An ordinary expense means it is one that is commonly accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.

Based on that definition, a charitable contribution is not a business expense. Even if you make the donation from your business account.

Stay with me because there is an exception.

If you are a Sole Proprietor, Single Member LLC, Partnership, or S Corp, the charitable contributions are reported on Schedule A with your itemized deductions. When the K1 is generated the charitable contributions are passed through to the partners or shareholders to report on their individual return.

The total itemized deductions must exceed the standard deduction for the charitable contribution to make a difference.

The Exception...

C Corporations may take a deduction for charitable contributions up to 10% of the taxable income. Contributions at exceed the limit can be carried forward to the next year.

Of course as with all things tax law this is not all inclusive. If you plan to make charitable contributions a part of your tax plan be sure to speak with a tax strategist in advance to plan accordingly.

Karitsa Kerns is an Enrolled Agent and Tax Strategist who specializes in reducing tax liabilities through proactive tax planning tailored for each unique individual. As an Enrolled Agent licensed through the Internal Revenue Service, Karitsa can represent taxpayers in all 50 states. As the owner of KNK Tax and Accounting Services, she provides services ranging from Tax Advisory, Fractional CFO, Tax Planning, Tax Preparation, and Tax Resolution.

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If you are a H.E.N.R.Y (High Earner, Not Rich Yet), working with an expert who specializes in Tax Strategy makes all the difference in your bank account. At KNK Tax and Accounting Services we provide quality services, and educate our clients to contribute to the success of their business. Please visit us at knktaxaccounting.com for more information or to schedule a consultation.