Can a Business Write Off Donations? Limits, Rules, and Documentation

A business can write off donations to qualified charities, but the mechanics depend almost entirely on how the business is organized. C corporations take the deduction on the corporate return. S corporations, partnerships, and sole proprietors pass the donation through to the owners, who claim it on their personal returns. On top of that, what you donated (cash, appreciated stock, inventory, services) changes both the deductible amount and the paperwork you need to keep. And starting in 2026, a new 1% floor makes small corporate donations produce no deduction at all.

How Your Business Structure Determines Where the Deduction Goes

C Corporations

A C corporation is its own taxpayer, so it deducts charitable contributions directly on Form 1120. The deduction reduces corporate taxable income. Cash-method corporations need to make the payment by year-end. Accrual-method corporations get a timing break: if the board authorizes the contribution before year-end and the payment goes out within three and a half months after the close of the tax year, it counts for the earlier year.

S Corporations, Partnerships, and Multi-Member LLCs

Pass-through entities don’t pay federal income tax at the entity level, so they can’t claim a charitable deduction on the business return itself. The contribution flows through to each owner on Schedule K-1, and each owner claims their share on Form 1040 subject to the individual AGI limits.¹

S corporation shareholders have an extra constraint. The deduction can’t exceed the shareholder’s basis in their S corporation stock plus any loans they’ve personally made to the company. Anything above that gets suspended and carried forward until basis is restored or the stock is sold. At-risk rules and passive activity limitations can pinch further.²

Sole Proprietorships and Single-Member LLCs

A sole proprietor does not deduct charitable donations on Schedule C. Putting a donation there would improperly shrink the self-employment tax base. The owner instead treats it as a personal gift on Schedule A of Form 1040, subject to individual AGI limits.¹

Because pass-through owners claim the deduction personally, they generally need to itemize on Schedule A to see any tax benefit. For 2026, taxpayers who take the standard deduction can also claim up to $1,000 of cash contributions ($2,000 for joint filers) as an above-the-line deduction.³ Anything above those figures still needs itemizing.

Which Recipients Actually Qualify

The IRS only allows charitable deductions for gifts to organizations recognized as tax-exempt under Section 501(c)(3): groups organized for religious, educational, charitable, scientific, or literary purposes, plus a few other categories.⁴ Before you write a check, confirm status with the IRS Tax Exempt Organization Search, which flags whether the group’s exemption is current or has been revoked.⁵

Several common payments look like charitable donations but aren’t. Gifts to 501(c)(4) social welfare groups don’t qualify because those organizations engage in lobbying and political activity.⁶ Political contributions aren’t deductible. Neither are gifts to individuals or directly to foreign organizations; to get a deduction for supporting a foreign cause, the money has to move through a U.S.-based charity that controls how the funds are used.⁷ Donations to federal, state, or local government entities do qualify when earmarked for a public purpose, along with certain veterans’ organizations and nonprofit cemetery companies.⁸

What You Can Donate and How It’s Valued

Cash

Cash is the easy case. A $10,000 check produces a $10,000 deduction, subject to the annual limits below. Checks, credit card charges, and electronic transfers all count as cash.

Property

Property donations get complicated fast, and the split turns on whether selling the property would generate ordinary income or long-term capital gain.

Ordinary income property covers inventory, short-term investments held one year or less, and anything else whose sale produces ordinary income. When a business donates it, the deduction generally equals the cost basis, not the fair market value.⁹

Capital gain property (assets held over a year that would generate long-term capital gain if sold) is far more favorable. The deduction is generally the full fair market value, and the business never pays tax on the appreciation. Donating appreciated stock is the classic example. The catch: the charity has to use the property in a way related to its exempt purpose. If the use is unrelated, the deduction drops back to basis.⁹

Food Inventory

Businesses donating food inventory to organizations serving the ill, needy, or infants can claim an enhanced deduction: basis plus half of the unrealized appreciation, capped at twice basis. The enhanced deduction is limited to 15% of net income from the trade or business making the contribution (15% of taxable income for C corporations).⁹ The recipient must use the food for charitable purposes and cannot resell it.

Services and Time

Donating employee time or professional services produces no deduction. The value of the labor itself is never deductible. Out-of-pocket costs incurred while providing those services (supplies, travel) are deductible.

Quid Pro Quo Payments

When the business gets something back for the donation, the deduction shrinks by the fair market value of what it received. A $500 charity gala ticket that includes a $150 dinner produces a $350 deduction. For any payment over $75, the charity has to send a written disclosure estimating the value of what it provided in return.¹⁰

Annual Deduction Limits

C Corporations: New 1% Floor Plus the Old 10% Ceiling

C corporations have long faced a 10% of taxable income ceiling on charitable deductions in any single year. For tax years beginning after December 31, 2025, a new floor applies: contributions are deductible only to the extent they exceed 1% of taxable income. The 10% ceiling still applies on top of that.⁹

For a corporation with $1 million in taxable income:

1% floor: $10,000. Donations below this amount produce zero deduction.
10% ceiling: $100,000. Donations above this amount aren’t deductible in the current year.
Donate $30,000, deduct $20,000 (the $30,000 minus the $10,000 floor).
Donate $150,000, deduct $90,000 (the $100,000 ceiling minus the $10,000 floor).

Contributions above the 10% ceiling carry forward for up to five years, applied first-in, first-out. Amounts falling below the 1% floor can only carry forward from a year in which the corporation also exceeded the 10% ceiling.⁹ For corporations that make consistent, modest donations relative to income, the new floor is expensive.

Individual Limits for Pass-Through Owners

Pass-through owners run into the individual AGI-based limits on their personal returns, which vary by property type and recipient:

Cash to public charities: 60% of AGI.¹¹
Capital gain property to public charities: 30% of AGI.¹¹
Capital gain property to private foundations: 20% of AGI.¹¹

Amounts above the AGI limits carry forward for up to five years on the owner’s personal return.

The Documentation Rules That Kill Deductions

The IRS is unforgiving about substantiation. Without the right paperwork, the deduction is disallowed entirely, whether or not the donation actually happened.

Every cash donation, however small, needs a bank record (canceled check, bank statement, credit card statement) or a written receipt from the charity.

For any single contribution of $250 or more, you need a contemporaneous written acknowledgment from the charity before you file. It has to state the amount of cash or describe any property donated, say whether the charity provided goods or services in return, and give a good-faith estimate of the value of anything received.⁹ “Contemporaneous” means in hand before you file. Chasing the letter after an audit notice arrives doesn’t work.

If your total non-cash contributions exceed $500, file Form 8283 with the return. The form asks for a description of the property, when it was acquired, cost basis, and how you determined fair market value. C corporations, other than personal service corporations and closely held corporations, only need to file Form 8283 when the claimed deduction exceeds $5,000 per item or group of similar items.¹²

When the claimed deduction for a single item or group of similar items exceeds $5,000, you also need a qualified appraisal and have to complete Section B of Form 8283.¹² The appraiser must be a paid professional with verifiable experience valuing that specific type of property, and can’t be the donor, the charity, a related party, or someone who works almost exclusively for the donor.

When a Sponsorship Beats a Donation

Not every payment to a charity should be structured as a charitable contribution. If a business sponsors a charity event and gets meaningful advertising in return, the payment may be deductible as an ordinary business expense under Section 162 rather than as a charitable gift. That matters, because business expenses aren’t subject to the percentage-of-income limits on charitable deductions, and they reduce self-employment income for sole proprietors.

The IRS draws the line based on what the business receives. Simple name and logo display isn’t advertising. But if the sponsorship includes qualitative language about the business’s products, price information, endorsements, or calls to action encouraging purchases, the payment starts to look like advertising and can be deducted as a business expense. A business that sponsors events regularly should look at each payment on its own terms to decide whether it fits better as a contribution or a marketing expense.

1
Internal Revenue Service. Charitable Contribution Deductions
2
Internal Revenue Service. S Corporation Stock and Debt Basis
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Internal Revenue Service. Topic No. 506 Charitable Contributions
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Internal Revenue Service. Exemption Requirements 501(c)(3) Organizations
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Internal Revenue Service. Tax Exempt Organization Search
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Internal Revenue Service. Donations to Section 501(c)(4) Organizations
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Internal Revenue Service. U.S. Charitable Contributions
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Internal Revenue Service. Governmental Information Letter
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Office of the Law Revision Counsel. 26 U.S. Code 170 – Charitable, Etc., Contributions and Gifts
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Internal Revenue Service. Charitable Contributions: Quid Pro Quo Contributions
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Internal Revenue Service. Publication 526, Charitable Contributions
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Internal Revenue Service. Instructions for Form 8283