Founders, initial board members, and donors, did you know that you may be eligible for a tax deduction for your contributions?
Here at the 501c3 Center, we often get asked about the vital role that the founder, board, or initial volunteers of a newly formed 501(c)(3) exempt organization play. Your contributions, both in terms of time and resources, are crucial to the organization’s success. And yes, you can take a tax deduction for personally paying the organization’s expenses during its first year in operation.
The process is Straightforward. A donor may claim a deduction for contributions made “to or for the use of” a charitable organization.
Once the organization has obtained the 501(C)(3) status, you can claim this deduction on your individual or corporate tax return. The organization should acknowledge your payments by issuing donation receipts and confirming in writing that you received no goods or services, such as tickets to an event or a tangible item. The donation receipt details should provide the necessary substantiation letter if ever audited by the IRS.
Helpful resources:
For further guidance, we recommend consulting the IRS Publication 535, Business Expenses: https://www.irs.gov/publications/p535. This resource provides detailed information on business expenses and can help you navigate the tax implications of your contributions.
IRS Publication 17, Federal Income Tax for Individuals: https://www.irs.gov/publications/p17
Closing
Remember, when it comes to tax matters, it’s always best to seek professional advice. Whether you’re an individual, a corporation, or a nonprofit organization, we’re here to support you. We strongly advise confirming your tax obligations by speaking to a Tax advisor.