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How Much Can a Corporation Write Off in Charitable Giving?

On Behalf of | Jul 19, 2022 | Taxes

Most people barely understand the tax rules that apply to them as individuals, so it is little surprise that corporate tax law leaves many people feeling overwhelmed and confused. Even someone who is confident about filing their personal income tax return with modern software will need help when it comes to their company’s taxes.

There are numerous significant differences between the rules that apply to businesses and individuals for income tax purposes. The applicable tax rates and the deductions available are among the most significant differences between people and businesses when it comes to tax liability.

Making the most of available write-offs can help companies limit their tax liability. Charitable contributions are a popular form of tax write-off for both people and companies. How much can a corporation donate to charity and right off on its tax return?

Corporations can write off less of their income than individuals

Charitable contributions are sometimes driven by a desire to make a positive impact. Tax write-offs can help incentivize more generous contributions. End-of-year contributions often have a major impact on non-profit organizations, and the motive for those last-minute gifts is almost always to get a tax break.

An individual filing a tax return can potentially make charitable contributions that offset 100% of their personal income tax liability. The same approach does not work for a corporation. The Internal Revenue Service (IRS) limits tax-deductible corporate giving to 25% of the company’s reported revenue. While the business can certainly make more contributions than that, it will not receive the tax benefits that an individual would for those contributions.

Making sense of business tax laws will help you minimize your company’s liabilities and maximize the revenue it generates. Having experienced legal guidance is important.

Notice: We are providing this as general information only, and it should not be considered legal advice, which depends on the facts of each specific situation. Receipt of this content does not establish an attorney-client relationship.