Broker Check

Who Takes the Deduction When a Business Collects Charitable Contributions

Howard Hook, CFP®, CPA, published in NJMoneyHelp on December 2, 2015

The Question: If my business helps collect money from customers for a charity, can I take the deduction? It’s usually just cash donations of a few bucks at a time.
— Could use the deduction

The Answer: Nope, you can’t take the deduction.

If a business asks customers, vendors or employees to contribute to a charity, the deduction belongs to the person making the donation and not the business, even though the business collects the donation, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.

For example, Hook said, many supermarkets or drug stores at checkout offer you the opportunity to donate a couple of dollars to a specific charity. The amount donated appears on your receipt and is your donation, and not the supermarket’s or drug store’s, Hook said.

“A slightly different variation where the business can take the donation would be if the business itself made a charitable donation from its bank account on behalf of a customer or client,” Hook said.

An example of this would be if a business made a $200 donation to a customer’s favorite charities. In that case, the business would take the donation, Hook said.

One other scenario is if a business offers to donate a portion of the proceeds from the sale of certain products or services to a charity.

“In that case, the donation also would be taken by the business,” Hook said. “The business would record the gross amount of the sale as revenue and then a separate expense for the donation would be recorded once the business sent the check to the charity.”

Also note if your business gives to a charity in exchange for an ad or other benefit, you can’t deduct the whole amount.