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15760 Ventura Blvd, Suite 610 Encino, CA 91436
FREE CONSULTATION818-436-2775
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Personal, Affordable Payroll Services, Bookkeeping, and Tax Processing for Small Business throughout Los Angeles County.

Make the Most Out of Charitable Donations for Small Business Taxes

If you still need to lower your tacx bil, do so through business charity donations.

For today’s small businesses facing increasing costs on nearly every front, finding a way to cut taxes is crucial. If your business has taken all of the internal deductions it can, and you still need to lower that tax bill, one way to do so is through charitable giving.

If you choose to give to charity, you are in good company. About three-fourths of all small business owners will donate a portion of their profits, with around a 6 percent average given. If you’re seeing a good profit this year, here are some tips to make the donation process as effective as possible.

Choose a Qualified Charity

In order to get the tax credit you’re going after, you need to choose an organization that is a qualified charity. You will need one recognized by the IRS as tax exempt. You can verify that the charity is a 501(c)(3) charity to check.

In addition, look at the mission and values of the charity. Choose one that is in line with your personal or business values and that will connect well with your customers or clients. This will help you not only with your tax goals, but also with your marketing goals. People like to work with companies that give back.

Know What Qualifies

Some donations, like a cash or check conation, are obvious, but others are less so. Know what you can donate that qualifies. Some ideas include:

• Cash donations
• Expenses incurred during volunteering
• Event sponsorship
• Inventory donation
• Services donation

Keep in mind that you can’t deduct the value of your time if you choose to volunteer, just the expenses incurred or the value of the services you offer if your company is a service-based business.

Know How to Claim the Deduction

Finally, make sure you know how to go about claiming the deduction on your small business taxes. First, document everything, asking the charity for a form that verifies your donation.

Pay your donation fully by the end of your tax year. Then, report it through Form 1040, Schedule A. Keep your deduction records in your tax archives, just in case you are audited by the IRS.

Finally, know the IRS limitations on how much you can donate, so you do not end up with donations that do not count. Limitations vary depending on your business’s structure. If you are operating as a sole proprietorship or LLC, you typically can deduct up to half of your adjusted gross income. Discuss limits with a tax professional if you plan to donate more than 20 percent of your company’s profits.

Small business taxes can be complex, but the more deductions you can get, the better at tax time. Taking advantage of charitable donation opportunities lets you reduce your tax liability while making your business more appealing to your customers. This will bring you more business and growing your bottom line!

Get the most out of your taxes and contact Accounting Taxes Payroll Partners today at 818-436-2775.