QUESTION DETAIL
Related User
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I'm trying to identity the best type of business entity to open for contributing to charities. For instance, if my business generates $500,000 in revenue and I donate $400,000 to non-profit organizations, how much can I write off at tax time? Can I write off the whole $400,000 or is there a limit to the amount a business can write off to charitable contributions?
ANSWER
Expert Carlton Melton's Answer:
There is a limit to the amount of charitable contributions that a corporation may deduct. A corporation may not deduct charitable contributions in excess of 10% of its taxable income for the year. The taxable income figure for this purpose excludes:
1. The deduction for charitable contributions.
2. The dividends-received deduction.
3. The deduction allowed under section 249 of the Internal Revenue Code.
4. The domestic production activities deduction.
5. Any net operating loss carryback to the tax year.
6. Any capital loss carryback to the tax year.
This is in contrast to the limitation rules for individuals which state that an individual may not deduct charitable contributions in excess of 50% of their Adjusted Gross Income (AGI). There are exceptions to the 50% limit rule which include contributions to certain organizations and contributions of capital gain property, which both have a 30% of AGI limit. See IRS Publication 526 for more information on charitable contributions.
