Year-End Giving, Done Right

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1. Feature: Year-End Giving, Done Right (4 min)

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Charitable giving by your company can be one of the quiet pleasures of owning a business. It lets you support causes you care about, strengthen your reputation, and, if handled correctly, reduce your tax bill. It does not have to be complicated, but it does have to be deliberate.

What follows is not a substitute for working with your own tax advisor. It is meant to give you a clear checklist and a way to ask better questions before year-end.

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First question: who should write the check?

The tax law cares who the legal “giver” is. That choice is often more important than the size of the gift.

If your business is a C corporation, the company itself usually takes the charitable deduction on its return. That deduction is limited to a percentage of the corporation’s taxable income, and larger gifts can often be carried forward into future years instead of being wasted. The benefit lives at the corporate level; it does not depend on what the shareholders are doing personally.

If you operate through an S corporation, partnership, or most LLCs, things work differently. In most cases, the business reports the gift, but the deduction passes through to the owners and shows up on their individual returns. Whether it helps them then depends on familiar individual rules: do they itemize deductions, what is their income level, and how much else have they given that year.

If you are a sole proprietor, payments to charity are generally treated as personal, not business, deductions unless what you are really buying is advertising. That can still be perfectly fine, but it belongs in a different mental bucket.

So, before you send money out the door, pause long enough to ask: “Should the business give this, or should I?”

What the law actually gives you

The tax code rewards giving, but not as generously as people sometimes assume.

Corporations get a deduction for qualified gifts, but only up to a slice of income, with a carryforward for the extra. Starting with tax years that begin after 2025, there is also a small “floor” for corporate giving: very small amounts may not produce any deduction until total giving reaches a certain level. That makes this year a more attractive time for modest corporate gifts than some years to come.

Owners of pass-through entities like LLCs feel the rules a different way. For them, the question is whether the flow-through deduction will actually matter on their individual returns. A gift that looks impressive in a corporate press release may not move the needle at all if the owners do not itemize or are already bumping into other limits.

In practice, the numbers matter, but the lesson is simple: do not assume every dollar given is a dollar deducted.

A timing rule that matters at year-end

There is one timing rule that often helps closely held C corporations.

If your company keeps its books on the accrual method, it may be able to “lock in” a deduction for a charitable gift this year even if the check goes out early next year. To do that, the board must approve the gift before year-end, and the payment must actually be made within a short window just after year-end.

The rule is generous, but it is not casual. If the board minutes are missing, undated, or done after the year closes, or if someone simply forgets to mail the check on time, the deduction slides into the later year. This is a situation where a half-page set of minutes and a calendar reminder are worth real money.

Common ways well-meaning owners get tripped up

Owners rarely get into trouble because they meant to do something wrong. Trouble comes from assumptions.

One common assumption is that any “good deed” is deductible. It is not. Payments to specific individuals, even in real hardship, are not treated as charitable gifts for tax purposes. For a payment to be a charitable contribution, it generally has to go to a qualified organization, not to a particular person.

Another assumption is that every payment to a charity is fully deductible. Again, not so. If your company receives tickets, meals, golf, a table at a gala, or other benefits in return, you can usually deduct only the part of the payment that exceeds the value of what you received. The charity may give you a letter spelling this out. Keep it.

A third assumption is that anything political or lobbying-related can be made “okay” by routing it through the business. In tax terms, these payments are often simply not deductible, and treating them as “charity” on your internal books does not change that.

Is it sponsorship, advertising, or a gift?

A lot of business giving lives in a gray area with logos on banners, names on programs, and mentions on websites.

If the charity simply acknowledges your company by name or logo and does not promote your products, give prices, or urge people to buy, the payment may be treated more like a sponsorship or gift. Depending on the details, that may qualify as a charitable contribution on your side.

If the message shifts into “Come see us,” “Best in town,” or “Call today,” you are firmly in advertising territory. That is not bad news. Advertising is usually deductible as a business expense. It just does not count as a charitable contribution for the special limits and rules that apply to gifts.

Here, labels matter less than substance. What appears on the banner or the website will matter more than what you wrote on the memo line of the check.

A simple checklist for year-end

You do not need a tax textbook to get this mostly right. You do need a short checklist and the discipline to follow it.

• First, make sure the organization is actually eligible to receive tax-deductible contributions. The IRS maintains an online list you or your advisor can check in a few minutes.

• Second, decide whether the payment is truly a gift or really advertising. Treat it accordingly in your books. Advertising is fine; just be honest with yourself about what you are buying.

• Third, if you are getting something back, write down what it is and a reasonable estimate of its value. That lets you and your CPA figure out what portion, if any, is a charitable contribution.

• Fourth, for any gift of a meaningful size, especially over the few-hundred-dollar mark, get a written acknowledgment from the charity that states what you gave and whether they provided anything back. Put that letter where you keep your tax records, not in a drawer you will forget.

• Finally, if your company is on the accrual method and you are counting on a deduction this year, make sure the board approval and the payment timing match the rule, and that someone is clearly responsible for each step.

Charitable giving works best when it is intentional and consistent with both your values and your tax posture.

If you give it the same quiet care you give to payroll and contracts, you can support good causes, avoid nasty surprises at tax time, and feel just a bit better about what your business accomplished this year.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!