How to Donate to Charity as a Business and Deduct It

A business can donate to charity and deduct the gift, but where the deduction lands and how much of it survives depends almost entirely on how the business is organized. Here is how to donate to charity as a business and deduct it: give cash or property to a qualified 501(c)(3), take the deduction on the corporate return if you are a C-corporation (within a 1% floor and 10% ceiling on taxable income), or pass it through to the owners’ personal Schedule A if you are a sole proprietorship, partnership, or S-corporation. Then match your paperwork to the size of the gift.

Confirm the Charity Is Qualified Before You Give

No deduction exists if the recipient is not eligible to receive tax-deductible contributions. Before writing the check, run the organization through the IRS Tax Exempt Organization Search.¹ Most qualifying recipients hold 501(c)(3) status. Skip this step and you may discover at filing time that a generous gift produces nothing.

What You Can and Cannot Deduct

Cash gifts are the simplest: checks, wires, electronic payments, and credit card charges to a qualified organization all count. Beyond cash, businesses commonly donate inventory, office equipment, publicly traded securities, and sometimes real estate. Each asset type follows its own valuation rule.

One rule catches many business owners off guard. You cannot deduct the value of services or employee time contributed to a charity. If your staff spends a week working on a nonprofit project, the market rate for that labor is not deductible no matter how valuable the work was. Unreimbursed out-of-pocket costs tied to the volunteer work are deductible, but the labor itself is not.²

Where the Deduction Lands: C-Corp vs. Pass-Through

This is the pivot point in business giving. The tax benefit shows up in very different places depending on how the entity is structured.

C-Corporations

A C-corporation deducts charitable contributions directly on Form 1120. For tax years beginning in 2026 and later, that deduction is allowed only to the extent contributions exceed 1% of taxable income, and it is capped at 10% of taxable income.³ The 1% floor is new under the One Big Beautiful Bill Act, and it changes the math for smaller gifts. A corporation with $2 million in taxable income gets nothing for the first $20,000 of giving, and its maximum deduction is $200,000.

Contributions above the 10% ceiling are not lost. The corporation carries the excess forward for up to five succeeding tax years, which keeps large one-time gifts usable even when current income cannot absorb them.³

Sole Proprietorships, Partnerships, and S-Corporations

Pass-through entities do not deduct charitable contributions at the business level. The deduction flows to the individual owners, who claim it as an itemized deduction on Schedule A of Form 1040.² Sole proprietors: a charitable gift is not a Schedule C business expense. It belongs on Schedule A, which means the owner has to itemize instead of taking the standard deduction to get any benefit at all.

Partnerships and S-corporations report each owner’s share of contributions on Schedule K-1, and the owner picks it up on the personal return.⁴ At the personal level, AGI-based limits apply: cash to public charities is capped at 60% of AGI, capital gain property to public charities at 30%, and gifts to private foundations at 30% for cash and 20% for capital gain property.² Excess amounts carry forward for five years.

Sponsorships and Event Tickets

When a business sponsors a charity event, whether the payment is a charitable contribution or a business expense depends on what the business gets back. This matters because business advertising expenses under Section 162 have no percentage cap.

A qualified sponsorship payment is one where the business receives no substantial return benefit beyond acknowledgment of its name, logo, or product lines. Value-neutral name, logo, or location listings are fine. The moment the acknowledgment adds comparative language, pricing, endorsements, or a call to buy, the IRS treats the whole message as advertising instead.⁵ Structured as advertising, the payment is a marketing deduction with no ceiling. Structured as a true contribution with only name recognition, it lives inside the Section 170 limits.

For quid pro quo gifts, only the amount above the fair market value of what you received is deductible. Pay $500 for a gala table where the dinner is worth $150, and $350 is deductible. The charity must give you a written disclosure statement for any quid pro quo contribution over $75.⁶

Valuing Non-Cash Gifts

Non-cash property creates most of the complexity. For inventory and other ordinary income property, the deduction is the lower of fair market value or cost basis, which usually means you can deduct what you paid for it and no more. If donated inventory was not part of your opening inventory for the year, its basis is zero and there is no deduction.²

Enhanced Deduction for Inventory Serving the Ill, Needy, or Infants

C-corporations that donate inventory for the care of the ill, needy, or infants can claim more than basis. The deduction starts at fair market value, subtracts half the unrealized appreciation, and caps at twice the property’s basis.⁷ The charity has to provide a written statement that the items will be used solely for that purpose and not resold. Food donations must also have complied with the Federal Food, Drug and Cosmetic Act for the 180 days before the contribution.

Vehicles, Boats, and Airplanes

Donate a vehicle worth more than $500 and specific rules take over. The charity must issue Form 1098-C, and you must attach Copy B to your return. If the charity sells the vehicle without significant use or material improvement, your deduction is limited to the gross sale proceeds rather than your own fair market value estimate.⁸ Skip the 1098-C and the IRS disallows the deduction outright.

Intellectual Property

Patents, copyrights, trademarks, and similar property are initially deductible at the lower of fair market value or basis. Additional deductions may follow in later years based on income the charity earns from the property, on a declining schedule that ends after ten years or the property’s legal life, whichever comes first. You have to tell the charity at the time of the donation that you intend to claim those additional deductions.²

Documentation Required at Each Dollar Threshold

The IRS steps up documentation as the gift grows. Missing a step voids the deduction even when the gift itself was real.

Any cash donation: bank record, canceled check, or credit card statement showing the charity’s name, date, and amount.²
$250 or more: a contemporaneous written acknowledgment from the charity stating the amount and whether you got anything in return. Contemporaneous means in hand by the earlier of the filing date or the filing deadline.⁹
Non-cash gifts over $500: Form 8283, Section A, filed with the return, describing the property, its fair market value, and how you got to that value.¹⁰
Non-cash gifts over $5,000: Form 8283 Section B plus a qualified appraisal from a qualified appraiser. The appraiser signs Part IV; an authorized representative of the charity signs Part V.¹¹

The $5,000 appraisal threshold is where most problems appear. An appraisal produced after the filing deadline will not rescue a disallowed deduction, and an appraiser who does not meet IRS qualification standards invalidates the whole claim. Commission the appraisal well ahead of filing.

When the Donation Counts

A contribution is deductible in the year it is delivered, which is not always when the charity deposits the money. A check is delivered on the date you mail it. A credit card charge is deductible in the year the charge is made, even if you pay the bill the next year. A text-message donation counts in the year you send the text. A pay-by-phone gift is delivered on the date the financial institution shows the payment on your statement.² For year-end planning, the credit card rule is especially useful: a December 31 charge locks in the current-year deduction.

Overvaluation Penalties

Inflated values on non-cash gifts draw accuracy penalties. If the value you claim is 150% or more of the correct value and the resulting underpayment exceeds $5,000, the penalty is 20% of the underpayment. Claim 200% or more of the correct value and the penalty rises to 40%.¹¹ A qualified, genuinely independent appraisal is the best protection. An appraiser with a financial connection to the donor or the transaction invites scrutiny.

Filing the Return

C-corporations put charitable contributions on Form 1120, where the 10% ceiling and 1% floor are applied and any excess feeds the five-year carryforward.¹²

Partnerships file Form 1065 and report each partner’s share on Schedule K-1, Box 13, with letter codes indicating which AGI limit applies to each type of gift.⁴ S-corporations follow the same pattern on Schedule K-1 (Form 1120-S). Individual owners then report the contributions on Schedule A (Form 1040), lines 11 through 14, and attach Form 8283 if total non-cash gifts exceed $500.² Amounts on the return should match the K-1 and the business’s ledger. Mismatches between those three reliably generate IRS correspondence.

1
Internal Revenue Service. Search for Tax Exempt Organizations
2
Internal Revenue Service. Publication 526 (2025), Charitable Contributions
3
Office of the Law Revision Counsel. 26 U.S. Code 170 – Charitable, Etc., Contributions and Gifts
4
Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065)
5
eCFR. 26 CFR 1.513-4 – Certain Sponsorship Not Unrelated Trade or Business
6
Internal Revenue Service. Charitable Contributions: Quid Pro Quo Contributions
7
Internal Revenue Service. In-Kind Contributions
8
Internal Revenue Service. Form 1098-C (Rev. April 2025) Contributions of Motor Vehicles, Boats, and Airplanes
9
Internal Revenue Service. Charitable Contributions: Written Acknowledgments
10
Internal Revenue Service. Instructions for Form 8283 (Rev. December 2025)
11
Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property
12
Internal Revenue Service. Instructions for Form 1120 (2025)