Businesses, being part of the local community, will often support area charity initiatives including sponsoring a soccer team, providing meals at a charitable event, contributing money or offering some other type of gift. The question may arise, "Is it tax-deductible if a business makes a donation?" Sometimes a donation is tax deductible, but federal tax codes must be followed. In cases where a deduction isn't allowed, there may be other ways for the business or its owners to reap a benefit.
IRS Rules
For businesses, IRS Publication 334 outlines what is tax deductible and what is not. According to the IRS, donations to business organizations are tax deductible. However, charitable contributions are not.
Client Gifts
If you want to woo a client and think that your gift will be tax deductible, you may be in for a surprise. According to "Entrepreneur," businesses are limited to a $25 deduction for gifts given. You don't need to be stingy with your client, but you should know that the $300 pair of tickets to the opera will be an expense you'll absorb above the permitted tax deductible limit.
Just Passing Through
If your business is set up as an S corporation, a partnership or a limited liability company, your business can make a charitable donation and the benefit can be passed on to you personally on your tax return. C corporations can deduct the charitable donation on their tax return.
Promotional
Although there are strict limits to what your business can deduct, you can circumvent some of these restrictions if your gift was advertising and it created business goodwill. For example, if you sponsor a local soccer team, you can deduct that cost as an advertising expense provided that there is clear evidence of your support. Imprinting your business' name on the back of the players' shirts or posting an advertisement in a program are two ways that are permissible, according to Nolo.
