It’s that time of the year where the weather is cooling down, holiday tunes are playing, and people are eating way too many baked goods (it’s okay, we all do it). But while you’re planning Thanksgiving dinner or wrapping presents this year, it’s important to remember that some people may not be able to enjoy the same luxuries.
Just because your business may be small, that doesn’t mean it doesn’t have the opportunity to make a big impact in the community. When you dig into the idea, you may find that giving a holiday donation this year won’t just help you get in the holiday spirit, but it can also help your business in the long run.
Why Should Your Business Donate to Charity?
There are several reasons why small businesses should give back to their communities. Beyond the fact that donating and helping others gives you that warm, fuzzy, holiday feeling, it’s also good PR. Donating creates a positive relationship between your business and the community—which is exactly what sets small businesses apart from large corporations.
When the community recognizes that your business is doing good and cares about the individuals in it, your business will be set apart from others in a positive way. Helping the community is a good way to get customers out of a national chain store and into your small business.
Some other reasons why your small business should donate this holiday season include:
- Giving can help build a network and relationships with other small businesses that could lead to partnerships.
- The charity you’re supporting could publicize your support in a newsletter, social media, etc.,which could bring in more business.
- The big one: tax write-offs.
Don’t forget that donating isn’t just about PR, getting something in return, or taxes. It should be—first and foremost—about giving to a charity that your business believes in.
What Do Donations Mean Come Tax Time?
A major plus for many businesses is that donations can be tax-deductible. This means you can deduct the market value of a donated item or the cash donated on your income tax return.
Let’s talk logistics. For your donation to qualify for a tax deduction, the charity you’ve chosen must be a bona fide 501 (c) (3) organization. This means that the organization in question is exempt from federal income tax. You can use this IRS search tool to confirm that your chosen charity is registered.
It’s important to note that how your business files its charitable donations depends on its entity type, so each business will be different.
The limit of charitable contributions you can write off per tax year depends on the type of organization your business is giving to. Donations to certain organizations can mean deductions up to 50% of your adjusted annual income, while others have a max tax deduction of 30%.
According to the IRS’s charitable contribution deduction page, the “50% rule” applies to:
- Public charities
- Private operating foundations
- Private foundations that distribute donations to private operating foundations and public charities
- Private foundations that pool contributions and eventually pay them to public charities.
The “30% rule” applies to charities that don’t apply to the “50% rule.”
Types of Charitable Giving That Can Be Deducted
|Can Be Deducted||Can’t Be Deducted|
|Gifts of Property or Equipment||Individual Gifts|
|Travel Expenses Accrued from Helping a Charitable Organization||Gifts to For-Profit Schools|
Who Should Your Business Donate to?
Pick wisely when choosing which charity your business will give to this holiday season. For small businesses that depend on their community, a good idea might be to donate to a local charity or a local sector of a national charity. Since your small business likely needs support from your local community, it’s important to show them that your business cares.
Think about how to make the most of your donation. Is there a charity with a mission that your company fully believes in? Is there one with potential partners to be had? Is there one with both of these qualities?
If your company finds a few different organizations that align with your company’s values, that’s great! If your company has the means to donate to all of them, then not only do more charities reap the benefit of your donation, but your business also gets to build relationships with great charitable organizations.
Other Ways to Give Back to Your Community
It’s really up to you how much you want your business to donate this season—and how much you realistically can given your financials. But if your business doesn’t have the resources to donate this year, don’t forget that’s not the only way to give. There are many ways to spread holiday cheer, especially at this time of the year.
Some other ways to give back to your community include:
- Volunteering: If your team has the time, this can make a more personal and long-lasting connection. Plus, to some organizations, this can be more helpful than cash donations.
- Donate Some Inventory: If you own a business like a toy, book, grocery, or sporting goods store and can spare a few items to donate, then those can be very valuable to charitable organizations.
- Donate a Percentage of Your Sales: Have a day (or multiple days!) when customers know a percentage of what they spend will go to charity.
- Host a Food or Toy Drive: Having a canned food or toy drive at your business is an easy but effective way to help the community.
As you can see, donating this holiday season doesn’t have to be difficult. There are many ways to donate and many reasons to do so. You just need to find your business’ unique way and start spreading that holiday cheer.
After you’ve decided on how you’re donating this holiday season, don’t forget to check out our blogs on how to prepare your business for the holidays.