MAKING CHARITABLE CONTRIBUTIONS THROUGH MY BUSINESS HELPS ME. RIGHT?

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I have heard many times; business owners say that making contributions to charitable organizations gets them a tax deduction. They can save more money in their business by doing this. Well, the true answer is not what they want to hear.

 For most of the businesses in the US, the answer is NO. Why not, you say? I gave money for business purposes to a charity. It should count for the same deduction as office supplies or wages. It does not.

 There are three main business entities in the US. Sole proprietorships (single owner), partnerships (two or more owners) and corporations (small and large). Of course, you have the LLC (limited liability company) which can be any of those three.

 The issue is that under sole proprietorships, partnerships and s-corporations (one of the two types of corporations), charitable contributions are considered pass-through items. Pass through items is not deducted to arrive at the net income or loss of the business. They are passed through or down from the business to its owners. The owners then take the deduction on their personal return just like if they had made the contribution themselves. For a c-corporation (the other type of corporation), the charitable contribution is deductible to a point but that is because a c-corporation is a standalone, tax paying business.  

Ok, so I will take the pass-through contribution off my personal taxes then, you say. Well maybe and maybe not. In 2018 we had a major tax change which doubled the standard deduction and eliminated personal deductions. When doing a tax return, you reach a certain point in preparation where you can deduct the HIGHER of your standard deduction or the total itemized deductions you have. Itemized deductions include out of pocket medical expenses above certain amounts, personal taxes paid, mortgage interest and charitable contributions.  

The problem is the standard deductions more than doubled in 2018 to almost $25,000 for a family ($12,500 for single) and have been going up each year since. Most people who did have higher itemized deductions under the prior to 2018 rules found out they did not itemize in 2018 and after. With the low interest rates, it is very hard for taxpayers to qualify for itemized deductions.  

So those pass through charitable contributions do not effect your return if you do not itemize.  

What can you do? First off, pick one or two organizations to support locally. Talk to them about sponsorships of programs, events, etc. and what “advertising” opportunities your business can have. I am not talking about your company name on a giving board in the lobby.  

Here is an example from me. I buy a sponsorship package each year for an organization for a large dinner and auction fundraiser. In return I do receive a dinner ticket and merchandise, which I reduce my cost by. What I get is that the organization places my company name in the program brochure, with my logo. They also have a continuous, rolling slide presentation of all sponsors going all night for the businesses who bought sponsorships. 

 Now do I take 100% of the remaining cost as advertising? No, more like 80% which I classify as Advertising! The remaining 20% goes to charitable contributions. So that 80% of the remaining cost is advertising, which is now deducted as a business expense to determine net income or loss.

So, I went from a nondeductible charity expense to a partially deductible business expense. As always you need to discuss things like this with your tax advisor or preparer. If you do not have one, please call our office for an in-office, ZOOM or phone meeting to discuss your entire tax situation.




October 18, 2025
If you could not complete your 2024 tax return by April 15, 2025, and are now on extension, that extension expires on October 15, 2025. Failure to file before the extension period runs out can subject you to late-filing penalties. There are no additional extensions (except in designated disaster areas), so if you still do not or will not have all the information needed to complete your return by the extended due date, please call this office so that we can explore your options for meeting your October 15 filing deadline. If you are waiting for a K-1 from a partnership, S-corporation, or fiduciary (trust) return, the extended deadline for those returns is September 15 (September 30 for fiduciary returns). So, you should probably make inquiries if you have not yet received that information. Late-filed individual federal returns are subject to a penalty of 5% of the tax due for each month, or part of a month, for which a return is not filed, up to a maximum of 25% of the tax due. If you are required to file a state return and do not do so, the state will also charge a late-file penalty. The filing extension deadline for individual returns is also October 15 for most states. In addition, interest continues to accrue on any balance due, currently at the rate of just over .5% per month. If this office is waiting for some missing information to complete your return, we will need that information at least a week before the October 15 due date. Please call this office immediately if you anticipate complications related to providing the needed information, so that a course of action may be determined to avoid the potential penalties. Additional October 15, 2025, Deadlines – In addition to being the final deadline to timely file 2024 individual returns on extension, October 15 is also the deadline for the following actions: - FBAR Filings - Taxpayers with foreign financial accounts, the aggregate value of which exceeded $10,000 at any time during 2024, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). The original due date for the 2024 report was April 15, 2025, but individuals have been granted an automatic extension to file until October 15, 2025. SEP-IRAs – October 15, 2025, is the deadline for a self-employed individual to set up and contribute to a SEP-IRA for 2024. The deadline for contributions to traditional and Roth IRAs for 2024 was April 15, 2025. Special Note – Disaster Victims – If you reside in a Presidentially declared disaster area, the IRS provides additional time to file various returns, make payments and contribute to IRAs. Check this website for disaster-related filing and paying postponements. Please call this office for extended due dates of other types of filings and payments and for extended filing dates in disaster areas. Please don’t procrastinate until the last week before the due date to file your extended returns. Final note: if for whatever reason you miss the October 15 deadline, you should still file your return as soon thereafter as possible. If you need a professional to assist you with your taxes or need tax information, get started with Steve Brewer CPA & Company.
By Kaitlyn Lynn September 16, 2025
After September 30, 2025, the IRS will NOT accept checks, money orders, cashier checks, etc. for payment of taxes, penalties, fines and interest. You will only be able to pay by ACH or with credit card. This does not affect the third quarter estimated individual tax payments which are due on September 15, 2025. It will affect every business and individual who will be making any form of payment thereafter. The fourth quarter estimate payment is due on January 15, 2025. You will not be able to pay this by check. It must be in some form of an electronic payment. You could go ahead now and make your fourth quarter estimate payment by September 15 along with the third quarter payment. You will need to designate the payment as fourth quarter and enclose any payment voucher you have. The estimate vouchers we give you do have instructions on how to pay online for both federal and state. What does this mean if you owe on your tax return? 1. You will have to arrange payment using the instructions that are included on your payment voucher. 2. If you have set up an individual account with the IRS, you may make the payment via that account. 3. Finally, we can arrange through our tax software to have the amount due deducted from your bank account. We must do this at the time of filing the return. Once the return is filed, we cannot refile it. We are going to offer another option. An individual estimated tax payment service. In this service we will arrange payment of your estimated payment each time one comes due. We will contact you about 2 weeks prior to the due date to confirm your information. We will then arrange for the estimate payment for both the federal and state. We will be offering this service for each quarter. For most of you it will be arranging payment of the estimates which we give you when you pick up your tax return. If you are one of our clients who we calculate up-to-date payments, you may add on this service. The cost of this service is $200 per year. If you are uncomfortable working with a computer, do not have time each quarter or just want to get it done, then this service is for you. If you are interested, please call Christina at the office to arrange a call to discuss this.
July 28, 2025
Many taxpayers don’t feel the need to keep home improvement records, thinking the potential gain when they sell their home will never exceed the amount of the tax code’s exclusion for home gains explained as follows. Under the current version of the tax code, you are allowed to exclude from your income up to $250,000 ($500,000 for married couples) of gain from the sale of your primary residence if you owned and lived in it for at least 2 years (24 months) of the 5 years before the sale. You also cannot have previously taken a home-sale exclusion within the 2 years immediately preceding the sale. There is no limit on the number of times you can use the exclusion if you meet these time requirements; however, extenuating circumstances can reduce the amount of the exclusion. The home-sale gain exclusion only applies to your main home, not to a second home or a rental property. As noted above, you must have used and owned the home for 2 out of the 5 years immediately preceding the sale. The years don’t have to be consecutive or the closest to the sale date. Vacations, short absences, and short rental periods do not reduce the use period. If you are married, to qualify for the $500,000 exclusion, both you and your spouse must have used the home for 2 out of the 5 years prior to the sale, but only one of you needs to meet the ownership requirement. When only one spouse in a married couple qualifies, the maximum exclusion is limited to $250,000 instead of $500,000. If you don’t meet the ownership and use requirements, there are some situations in which a prorated exclusion amount may be possible. An example of this situation would be if you were required to sell the home because of extenuating circumstances, such as a job-related move, a health crisis or other unforeseen events. Another rule extends the 5-year period to account for the deployment of military members and certain other government employees. Please call this office if you have not met the 2 out of 5 rule to see if you qualify for a reduced exclusion. But what if your home sale gain is more than the home sale exclusion? Then it is in your best interests to have kept home improvement records, since the costs of improvements can be added to your purchase price of the home to be used in determining the gain. So keeping the receipts for the improvements, even if only in a folder or a shoe box, may be useful in the future when you sell your home. Here are some situations when having home improvement records could save taxes: The home is owned for a long period of time, and the combination of appreciation in value due to inflation and improvements exceeds the exclusion amount. The home is converted to a rental property, and the cost and improvements of the home are needed to establish the depreciable basis of the property. The home is converted to a second residence, and the exclusion might not apply to the sale. You suffer a casualty loss and retain the home after making repairs. The home is sold before meeting the 2-year use and ownership requirements. The home only qualifies for a reduced exclusion because the home is sold before meeting the 2-year use and ownership requirements. One spouse retains the home after a divorce and is only entitled to a $250,000 exclusion instead of the $500,000 exclusion available to married couples. There are future tax law changes that could affect the exclusion amounts. Everyone hates to keep records but consider the consequences if you have a gain and a portion of it cannot be excluded. You will be hit with capital gains (CG), and there is a good chance the CG tax rate will be higher than normal simply because the gain pushed you into a higher CG tax bracket. Before deciding not to keep records, carefully consider the potential of having a gain more than the exclusion amount. Home improvements include just about anything that will increase the value of the home, from big ticket items like remodeling a kitchen, adding another room or a swimming pool, and landscaping to smaller items like ceiling fans. But there are some home improvements that cannot be included in the cost of home improvements, or may be only partly included. Examples are items which qualify for tax credits such as home solar, home energy efficient improvements or those that qualify for a tax deduction such as handicap improvements. In addition, the costs of general maintenance or repairs, such as fixing leaks, painting (interior or exterior), and replacing broken hardware do not count as improvements. If you have questions related to the home gain exclusion or questions about how keeping home improvement records might directly affect you, please give this office a call.