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Starting Your BusinessWhat are Business ExpensesContributionsCharitable contributions. Cash payments to charitable, religious, educational, scientific, or similar organizations may be deductible as business expenses if the payments are not charitable contributions or gifts. If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. However, corporations can deduct charitable contributions on their income tax returns. For more information, see Publication 542, Corporations. Individuals, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on their individual income tax returns. These deductions are reported on Schedule A (Form 1040) Itemized Deductions. Inventory. You can take a charitable contribution deduction for items donated to a qualified charitable organization. Your deduction is limited to the fair market value of the property on the date of the contribution less any gain you would have realized if you had sold the property at its fair market value. You must remove the amount of your contribution deduction from opening inventory for the year you make the contribution. These costs are not part of the cost of goods sold. Use these costs in figuring the basis of the donated property. Political contributions. You cannot deduct contributions or
gifts to political parties or candidates as business expenses.
In addition, you cannot deduct expenses you pay or incur to take
part in any political campaign of a candidate for public office. Important References: Publication 17 Your
Federal Income Tax |