Tax Deduction for Business
It’s never too early to start thinking about and preparing for year-end taxes. There’s usually one way or another to recover the expenses paid that went toward running the business. In fact, many business owners are losing out on getting exempted from the following business purchases. Here are just one of the many tax write-offs that could be deducted from taxes that business owners should know and be aware of. Check out the rest of the Tax Deductible Purchases blog series to see how you can save money from these business expenses.
What is a Tax Deduction/Write Off
Also known as tax write-offs, are eligible expenses that you can deduct from your income for tax purposes. This lowers a person’s or organization’s tax liability by decreasing their taxable incomes. Business owners can end up saving a lot of money, but don’t realize that certain types of business costs are qualified for a tax deduction. There are two types of deductions, standard and itemized.
Giving back to a community doesn’t just limit to individuals. Donating to a charity as a business not only helps the company’s image but in a way also boosts employee pride in the company they work for. This in turn spreads the word of mouth from both organizations, whether it be internal or external.
What Are the Rules?
In order for a company to deduct charitable contributions, they first need to check that the charity is qualified for it. Not all charities are eligible for a tax break. In order to be certain that you are donating to a qualified organization and understand the limitations on the deductions, make sure to check the following requirements:
The transfer must be made to a qualifying charity organization
The transfer must be properly substantiated
The transfer must be of money, rather than services or time given
The transfer must be made with donative intent
Here's a quick video on how a tax breaks work.
Qualified Charity Organizations (according to the IRS)
A state or United States possession (or political subdivision thereof), or the United States or the District of Columbia, if made exclusively for public purposes;
A community chest, corporation, trust, fund, or foundation, organized or created in the United States or its possessions, or under the laws of the United States, any state, the District of Columbia or any possession of the United States, and organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals;
A church, synagogue, or other religious organization;
A war veterans' organization or its post, auxiliary, trust, or foundation organized in the United States or its possessions;
A nonprofit volunteer fire company;
A civil defense organization created under federal, state, or local law (this includes unreimbursed expenses of civil defense volunteers that are directly connected with and solely attributable to their volunteer services);
A domestic fraternal society, operating under the lodge system, but only if the contribution is to be used exclusively for charitable purposes;
A nonprofit cemetery company if the funds are irrevocably dedicated to the perpetual care of the cemetery as a whole and not a particular lot or mausoleum crypt.
At the end of the day, donating as a business owner, in turn, builds up the company’s image but also helps give back to the community that you are passionate about for a good cause will serve benefits all around. Check out the rest of the Tax Deductible Purchases blog series in order to help save money with the business expenses.