Can You Deduct Charitable Contributions as a Business Expense?
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Hello High Earners and Future High Earners, I wanted to circle back and continue the topic around charitable contributions. The last time we spoke about how it makes a difference (or not) on your individual return. This week the focus is on the business side. 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. Have you been reading my emails knowing you need a new tax strategist? The longer you wait to switch to someone who specializes in tax strategies, the longer you'll over pay taxes. If you are a H.E.N.R.Y (High Earner, Not Rich Yet) looking to increase your net worth through tax savings, we are accepting new clients. Schedule your consultation today to secure your spot for our exclusive services.
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Welcome to the KNK Tax & Accounting Blog
by Karitsa Kerns - Enrolled Agent and Tax Advisor
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