It’s that time of year again – the season of giving! As a small-business owner, you may be thinking of making a charitable donation this year through your organization. Giving money to charity is rewarding both personally and financially. Many small business owners donate a portion of their profits to charitable organizations annually – at an average of about six percent!
If you are considering charitable giving this year, here are four things you should know that can help guide you through the process.
Verify the Organization
Before you donate to any organization, research it. Be absolutely sure it is legitimate and registered as a 501(c)3 status with the IRS. A charity must have this status if you plan to deduct your donation. You can check an organization’s status with the IRS here.
Decide How Much to Give
After you’ve decided WHAT organization to give to, you need to decide how much you plan to give. One of the most important factors when making this decision is how much money you can deduct from your taxes. You can check with the IRS here to find out.
Understand What Counts as a Charitable Donation
There are three different types of charitable gifts that you can deduct:
- Gifts of property or equipment
- Travel expenses accrued when helping a charitable organization
You can always check with the IRS for a complete list of charitable donations.
Keep Thorough and Accurate Records
You need to keep accurate records of any charitable donation your business gives to in 2022. Ask for a receipt in writing from the organization and make sure it is completed with your full business name, address, date, and description of what was given. Without an official receipt, you cannot deduct the donation from your tax return.
One last thing to keep in mind with charitable giving is that charities don’t just need donations at the end of the year when people are often thinking of them. Many charities have needs throughout the year, such as food banks and nature conservancies. Helping such organizations throughout the year can not only help the charity, but keep your small business from hurrying at the end of the year to figure out its charitable giving for tax deduction purposes.