Taxpayer asks:
Hello,
My husband’s business gets letters from people asking for cash donations/sponsorships. Specifically, when students write to us asking for sponsorship for a People to People Ambassador program for their son/daughter to attend, or Cheer camp sponsorship for their cheerleading daughter to attend, or asking for a sponsorship for their child’s go-kart racing hobby at a local track, etc. Basically, I guess they are writing to us asking for cash to help pay for the expenses incurred in all of these endeavors.
I highly doubt that this type of thing would be a deduction for us on the business, but wanted to hear it from you.
Taxgirl says:
I’m right there with you! As business owners, we receive all kinds of solicitations for donations and sponsorships.
The easy answer first: Unless you’re making a contribution directly to a qualified charity, you cannot claim it as a charitable donation. Even if you give money directly to a sick person or build a home for a homeless person, it may be charitable in terms of the goodness of your heart but it is not deductible as a charitable donation.
But all is not lost. Unlike a personal gift which is not deductible, businesses have a second bite at the apple. If you can parlay that sponsorship into a promotion or advertising, you can make it deductible. For example, it could be the “taxgirl.com go-kart” with a paid sponsorship – now it’s deductible as advertising/promotion (which may be arguably better for you on your taxes anyway).
Of course, be smart. You can’t be ridiculous and the promotion must have some kind of logical connection to your business (it has to be seen, for example). But ads in event programs, tee shirts for kids’ soccer or football teams, all of those things can be used to promote your business – and you may be able to write off the cost, to boot!
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
Question: If I sponsor a flag football team, would that be considered a charitable deduction? or something else?
Thanks,
Maurice