The holiday season is also the season of giving, and many businesses often get into the holiday spirit along with everyone else. Determining what causes to give to and how much you can donate can be difficult, but it’s also important to keep in mind that your company receives benefits from donating to charitable causes as well. While your main focus should, of course, be on the good that you can do with your donation, here are a few benefits that your company can reap by donating during the holidays.
So long as you’re donating to a verified non-profit organization, your donations during the holiday season will be tax deductible when you file your return in the spring. This can allow you to give more, while getting a portion of that back when you file your return. For example, let’s saying that your business decides to donate $10,000 to a local charity, and your business is taxed at 35%. That donation reduces your taxable income by the amount given, which means your tax bill will be reduced by roughly $3,500 dollars. So, in essence, the charity will receive $10,000 from your business while you’re only actually giving up $6,500, since you’ll be getting back $3,500 when you file.
These deductions can make a huge difference in your tax liability, and many businesses will use that to help further improve their tax situation. With proper planning, you can determine the best amount to donate in order to maximize your tax benefit while helping an important cause in your community.
People like to work with businesses that feel like a part of the community, and one of the best ways to show that you’re a part of your community is to give back to it. Your business’s charitable acts during the holidays can help to garner some good publicity and put your company in a positive light. While it might be hard to measure the benefit of this in dollars and cents, it’s certainly there. Charitable acts put your company’s name into people’s minds, shows that you care about the community, and gives your business the kind of approachability and humanity that no marketing tactic can match.
It’s no secret that doing good feels good, and getting your employees involved in your company’s holiday giving can be an incredible booster for employee morale. Working together as a business to do good in the community provides your team with a sense of purpose that goes beyond making a profit and can be an excellent team-building activity.
Of course, the morale boost works best if your employees are actively participating in your charitable acts, so this would go beyond something as simple as a cash donation to a local charity. Find something that your employees can become excited about and take ownership in. This could be a toy, clothing, or food drive, a day spent putting together blankets or hygiene kits, working at a local food bank, a Christmas party at a nursing home or homeless shelter, and so on.
Keep in mind that if your company purchases goods for a charitable activity such as those described above, your purchases will also be tax deductible on your return.
Helping others brings people together on both personal and professional levels. Charity drives can often involve multiple businesses working together towards a common cause, which opens up excellent networking opportunities for your business. Forming these connections in this way, as opposed to at traditional networking conferences, can create a more natural, genuine relationship between your companies. Often, these connections are highly beneficial to both businesses for years to come.
Ultimately, all of the above factors can help contribute to increased profits for your business. The good publicity, connections you form, and increased employee morale all translate to a more profitable business. And, of course, tax deductions can go a long way towards saving your business money over the years, even as you continue to give to good causes.
If you’re wondering how your business’s charitable donations and activities will impact your taxes, contact Peter Witts, CPA, today. We specialize in working with businesses, and can help you to better understand the tax implications of your charitable donations, whether they be in the form of cash or goods. We’ll also help to ensure that you have all the proper documentation needed to claim these deductions on your tax return in the spring. Call now to schedule your appointment with one of our tax preparers.