Thinking about donating to a nonprofit? Here’s something to think about: your donation may be non-deductible.
501c3s may be the most common nonprofit and donations to them are tax-deductible. There are numerous other nonprofit “types” designated under Section 501 in the US tax code that can qualify for federal income tax-exempt status. However, not all of them are considered tax-deductible nonprofits.
Some of these organizations are:
- 501c4 – Civic leagues and social welfare organizations (e.g., local employee associations, Sierra Club)
- 501c5 – Labor, Agricultural and horticultural organizations (e.g., Horse clubs, LA County Fair Association)
- 501c6 – Business Leagues (e.g., Chambers of commerce, Better Business Bureau, Los Angeles Tourism & Convention Board. Interesting fact: the NFL qualified as a 501c6 for many years until recent media attention on the NFL’s income and place as the most watched US sport drove them to drop the designation.)
- 501c7 –Social & recreational clubs (e.g. various fraternities like Sigma Phi Epsilon)
- 501c14 – Credit unions and other mutual financial organizations (e.g., Golden 1 Credit Union, Orange County Credit Union)
- 501c19 – Veteran’s organizations (e.g., USO, American Legion)
Nondeductible status doesn’t always apply across the board for a certain kind of 501c. For example, donations made to some 501c4s, such as war veteran groups and volunteer firefighter organizations, can be tax deductible, but donations made to a 501c4 like Sierra Club will not be tax deductible.
If you may be considering contributing to a nonprofit in the hopes of a tax-deduction, confirm if your donations are tax-deductible with their 501c designation. Otherwise you may unpleasantly learn at the end of the year that your monthly monetary donations won’t ease your tax burden.
Having a trusted adviser assist with research on nonprofits is always helpful. As a business owner, you may not always have the time to thoroughly check if the nonprofit you are considering donating is a tax-deductible nonprofit. That, and many other needs are something we can certainly help with! MiklosCPA is an accounting and tax advisory firm that helps businesses with their accounting and tax needs so that its leadership can focus on the most important part, growing the business! If you would like to learn more about our services, contact us! If you found this article useful, follow us on our social media pages for future updates, and share this with friends and associates.