Business Guide to Charitable Giving

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With the holidays approaching, many businesses choose to bring in the season with a donation to charity.

This kindness can lead to great things for their community as well as goodwill for their brand. This is a great way for your business to support your customers and give you easy publicity. There are a few things to watch out for when giving a charitable contribution that could save you quite the headache.

Why give back to the community?

Though this may seem like a rhetorical question, there is some truth to asking yourself why your business should give back. First of all, by giving back to the community where your company is based you gain some great PR with your customers. This is one place where small business win out over their large corporate opponents because they can have a more personal relationship with their neighbors. This donation also gives you a small tax deduction at the end of the year but never forget that some good philanthropy goes a long way.

Also, by choosing who your business will make this donation towards will grant you an opportunity to make a new alliance with organizations in your community and potential partners. This decision can lead to long-lasting relationships which can give you more business and more publicity.

What you need to know about this donation

For a local business, it is wise to choose a local organization to donate to but there is more to it then their location. You’ll need to make sure that the organization is a bona fide 501(c) (3) organization to get the benefit of a tax deduction. The IRS has a tool on their website that can help you find an organization in your area that is registered. It's important to note that the Tax Cuts and Job Act of 2017 made it harder to claim tax deductions for charitable giving.

There are ways, however, to get around this change, including the use of a donor-advised fund. A donor-advised fund allows you to donate enough money upfront in one year to become eligible for tax deductions while the donor-advised fund holds onto the money. You can then distribute the money from the fund over several years if you want to make more regular donations.

Another concern that many business owners have is whether or not their money is winding up in the right place and if it is being used properly. This is something that you must do your homework researching the organization to ensure that their brand matches with yours. One thing you can do is call the organization and ask to speak with the executive director. Nonprofit leaders should be happy to talk with potential donors about their organization and their impact and should be especially interested in building relationships with local businesses.

This may sound a bit confusing but you can contact me to find out how I can assist you and your business.

How much is the right amount?

According to the U.S. Small Business Association, companies donate an average of 6 percent of their profits to charity. The tax benefit that you will be given is entirely based on how much you decide to donate and your business’ revenue. This decision is ultimately up to you but one thing I urge you to consider is to donate only what you are able to donate. Do not put your business into a bad position by donating too much because you wanted to assist your community.

Donating to local organizations is a worthwhile cause and it’s also important to not sink your business. In this same light, it's best to keep detailed records of charitable donations for your tax return. Most nonprofits will give you a standard form for tax-filing purposes.

Final Note for Security

Be aware that scammers send out email scams for charitable donations during the holiday seasons. They are trying to take advantage of people’s giving hearts during this time of year when everyone is feeling more giving. If you get an email that you are not sure about then do some research before moving forward. If you are wanting to make a donation, make sure you know who it is going to, what the organization's beliefs are, what your donation will be assisting with, who the main players are in the organization you choose, etc. Do your research!