When individuals or businesses raise money for charity, there are often tax implications to consider. Donations made to qualified charitable organizations can be deducted on federal income taxes, but what about the costs involved with fundraising itself? Can someone “write off” expenses related to fundraising on their taxes? There are a few key factors to consider.
What expenses can be deducted for fundraising?
The main expenses that can potentially be deducted for fundraising efforts are:
- Costs involved with hosting a fundraising event – This includes expenses like venue rental, food, entertainment, supplies, advertising for the event, etc. However, there are rules around what percentage of these costs can be deducted (see next section).
- Travel expenses related to fundraising activities – This includes airfare, lodging, mileage in personal vehicles, meals, etc. for travel taken substantially for fundraising purposes. There are record-keeping requirements.
- Expenses for printing/mailing fundraising solicitations – Things like printing costs for letters, brochures or cards that request donations, postage and mailing supplies, list rentals, etc. can potentially be deducted.
- Professional fees related to fundraising – Accounting fees specific to tracking deductible fundraising expenses or fees paid to professional fundraisers can also sometimes be deducted.
However, there are limitations around these deductions depending on whether the fundraising is for a business or an individual.
Fundraising expense deductions for businesses
Businesses that engage in fundraising activities can deduct related expenses as business deductions on their tax returns. This includes C-corporations, S-corporations, LLCs, partnerships and sole proprietorships.
Some key things for businesses to note:
- All ordinary and necessary fundraising expenses are deductible – The full amount of expenses like venue fees, catering, supplies, advertising, travel, professional fees, etc. can be deducted if directly related to fundraising.
- Must be tied to business purpose – The fundraising must be substantially for business interests, such as raising money for a charity aligned with the company’s brand, mission or target customers.
- Subject to 50% limit on meals/entertainment -meal and entertainment expenses related to fundraising are subject to the 50% deductibility limit.
- Documentation is key – Keep detailed records of fundraising expenses and activities to validate tax deductions.
Businesses should consult with a tax professional to ensure fundraising deductions are handled correctly.
Fundraising expense deductions for individuals
Individuals who engage in fundraising activities can also deduct associated expenses on their personal tax return. However, there are more limitations than for businesses.
Key considerations for individuals:
- Must itemize to claim deduction – Expenses for individual fundraising are only deductible if the taxpayer chooses to itemize deductions on Schedule A. The standard deduction cannot be taken.
- 50% of meal/entertainment expenses deductible – Only 50% of expenses related to meals and entertainment for fundraising purposes are deductible.
- Vehicle expenses limited to 14 cents/mile for charity – Mileage deductions for using a personal car are capped at 14 cents/mile for charitable fundraising purposes.
- Direct offset of fundraising income required – Individuals cannot deduct fundraising expenses beyond what they report as income on the same return. Expenses can only directly offset fundraising income.
- Records requirements – Detailed mileage logs, receipts, bank/credit statements, etc. must be kept to substantiate expenses.
Individuals should pay close attention to these limitations and consult a tax professional when claiming fundraising expense deductions.
Examples of deductible fundraising expenses
To understand what types of specific fundraising expenses are typically deductible, here are some examples for both businesses and individuals:
For businesses:
- Venue rental fees for a fundraising gala
- Catering and entertainment costs for an annual charity golf event
- Printing costs for fundraising brochures, pledge cards and response devices
- Postage for mass mailing requesting donations
- Advertising in local media promoting an upcoming fundraising event
- Grant writer professional fees for completing applications to secure charitable grants
- Airfare, lodging and 50% of meal costs for traveling to meet with major donation prospects
For individuals:
- 50% of costs for a catered fundraising picnic in the local park
- 14 cents/mile for driving to deliver fundraising materials to donors’ homes
- Printing costs for small donation envelopes to include in holiday cards
- 50% of meal expenses while discussing potential corporate donations over lunch
- Hotel charges while out of town to organize and run a charity golf tournament
- Postage for year-end fundraising solicitation letters
Non-deductible fundraising expenses
Not all expenses related to fundraising activities are deductible on taxes. Here are some examples of costs that typically cannot be deducted:
- The value of donated time or services
- Direct donations made to a charity or cause
- Appraisal fees for noncash donations outside of business context
- Late fees on credit cards used for fundraising expenses
- Parking tickets, speeding tickets, or other fines
- Expenses that lack proper documentation
- Costs not directly tied to active fundraising efforts
Businesses and individuals should be careful to only deduct qualifying fundraising expenses that are ordinary, necessary and directly related to fundraising activities.
Key considerations when deducting fundraising expenses
If deducting fundraising expenses on your taxes, keep the following key tips in mind:
- Maintain detailed records – Have receipts, invoices, bank/credit statements, mileage logs, etc. to document expenses.
- Track % used for fundraising – If assets like computers, phones, autos, etc. are used partially for fundraising, track % used for deductibility.
- Apportion expenses accurately – Allocate portion of overhead expenses that apply to fundraising like utilities, insurance, etc.
- Get professional advice – Consult a tax professional to ensure fundraising deductions are handled correctly.
- Claim in proper tax year – Deduct expenses in the same tax year they are incurred.
- Watch for deduction limits – Be aware of limits on things like meals, entertainment, mileage, individuals offsetting income, etc.
Proper record-keeping and tax planning are key to maximize eligible deductions for fundraising activities.
Frequently Asked Questions
Here are answers to some common questions about deducting fundraising expenses on taxes:
Can I deduct the cost of prizes or giveaways for fundraising events?
For businesses, the costs of prizes or giveaways are fully deductible as long as they serve a legitimate business purpose. For individuals, these costs are only deductible up to the amount of fundraising income reported and are subject to the 50% limit on entertainment expenses.
Are volunteer expenses for fundraising deductible?
Unfortunately, out-of-pocket expenses for volunteers are not deductible since they are performing services without compensation. Items donated by volunteers are also not deductible as contributions.
Can I deduct appraisal fees for noncash donations?
Appraisal fees are only deductible for noncash donations made by a business. Individuals cannot write off appraisal fees for noncash donations.
Are online fundraising platform fees deductible?
Yes, businesses and individuals can deduct fees paid to online fundraising platforms like GoFundMe as a fundraising expense, subject to the appropriate deduction limits based on if its a business or individual.
Can I deduct travel to meet a donor over lunch?
For businesses, the full cost of travel to meet donors is deductible, but the lunch is 50% deductible. For individuals, the mileage is limited to 14 cents/mile and the lunch is 50% deductible.
| Fundraising Expense | Deductibility for Businesses | Deductibility for Individuals |
|---|---|---|
| Venue rental for gala | Fully deductible | Fully deductible if itemizing |
| Food/catering | 50% deductible | 50% deductible if itemizing |
| Advertising/promotional costs | Fully deductible | Fully deductible if itemizing |
| Professional fees | Fully deductible | Fully deductible if itemizing |
| Mileage for travel | Fully deductible | Limited to 14 cents/mile |
| Airfare/lodging for travel | Fully deductible | Fully deductible if itemizing |
| Printing/supplies | Fully deductible | Fully deductible if itemizing |
| Postage | Fully deductible | Fully deductible if itemizing |
Conclusion
In summary, fundraising expenses can be deducted on taxes for both businesses and individuals, but there are important limitations to be aware of. Keep detailed records, follow deduction rules, and consult tax professionals to ensure fundraising deductions are handled correctly. Ongoing tax planning is needed to maximize eligible write-offs.