Austin Tax Blog


From Giving Tuesday pledges and toy drives, to shelter volunteering and food banks, charitable contributions are a part of many people’s holiday season. Small businesses are a huge participant in giving, with around 75% of them reporting donations of time, money and goods, averaging 6% of their annual profit. To honor that spirit of giving, we’ve put together a quick guide on how to best make that benevolence benefit you back, with a little tax preparation for your Austin business.

Know the rules for your company

The IRS’ protocol about tax deductions varies for different business structures, so familiarize yourself with the rules for your company type before making decisions on how to give. Also, make sure that your contribution is paid in full by the end of the tax year and remember that the IRS limits your eligible tax deductions for charitable giving to 50% of your adjusted gross income (AGI).

Pick the right charity

Not every charitable organization qualifies for tax-deductible donations, so make sure you do your research. Picking a 501(c)(3) organization is the safest bet, or you can use this IRS search tool to check the eligibility of any organization. You can even use it to look through a complete list of eligible organizations.

On top of this, properly research any charity before contributing to them to vet their effectiveness at what they’re aiming to do. Bonus points if you can find somewhere to give that is related to your business, such as volunteering at a local dog shelter if you run a pet grooming service.

Make a deductible donation

This goes hand in hand with knowing the rules for your business. Eligible donations can include cash, volunteered services, inventory donation and sponsorship of a charity event, but not all company types can deduct all categories of donations.

For instance, the only business structure able to deduct a cash charitable gift as a business expense is a C Corporation. Also, sole proprietorships cannot deduct donated services, as the IRS places no monetary value on time or expertise. They can, however, deduct mileage to and from where they’re volunteering and the cost of any supplies or materials used during that effort. Due diligence is needed to ensure you’re not left in the lurch come tax time.

Involve employees and customers

According to the U.S. Small Business Administration, employees with a positive view of their company’s charitable program are five times as likely to stay with that employer, and 85% of consumers have a more favorable impression of companies who are philanthropic. Whether it’s a group volunteer day or just a simple pass of the hat, build team spirit by inviting employees to join in, and brand goodwill by letting customers know about your efforts.

Keep records

This is so important, and many people fail to take it seriously. Collect receipts for everything donated and keep them together in a safe place. If audited, you will want a record of all of your gifts and will be mentally kicking yourself if you can’t find them. Don’t let your generous heart turn into a headache later down the road.

As usual, it’s always best to run business financial decisions past your accountant or tax attorney if possible, so make sure you have a good Austin area tax preparation service to assist you in your efforts. Contact us today for advice on how to make holiday giving give back, or any other small business-related tax help you may need.