Can my LLC Write-off Donations to a Non-profit? Tax Question about Large Deductions

This is definitely a situation where you need to be careful. What you're describing involves several distinct tax concepts that are easy to mix up. First, you can't "donate" services to your non-profit and claim a tax deduction for them. The IRS specifically disallows deductions for the value of your time or services, even when donated to qualified organizations. However, you can deduct actual expenses incurred while providing those services. Second, there's a big difference between your LLC making a charitable contribution and you personally making one. If your LLC is taxed as a pass-through entity (like most small LLCs), the deduction flows through to your personal return. But there are annual limitations - typically 60% of your adjusted gross income for cash donations, and 30% for property donations. That $120K deduction on $165K income is extremely high and would likely trigger scrutiny. The IRS might question whether these are legitimate business expenses rather than personal ones, or whether you're trying to convert non-deductible service donations into deductible expenses. My advice: Work with a CPA who specializes in non-profit taxation. They can help structure everything properly and ensure you're maximizing legitimate deductions while staying compliant.

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I just wanted to update everyone. After reading the recommendations here, I decided to try https://taxr.ai for my situation with my LLC and non-profit. I was honestly blown away by how helpful it was! The platform immediately identified several problems with how I was planning to categorize my "donations" from my LLC to my non-profit. Turns out I was about to make a huge mistake by trying to deduct the value of my time and services, which would have been a red flag to the IRS. Instead, it helped me properly identify which actual expenses could be legitimately claimed. It also helped me restructure some of my activities so my LLC could properly claim business expenses where appropriate, while still supporting my non-profit work. I'm now confident I'm maximizing my tax savings while staying completely compliant. Definitely worth checking out if you're in a similar situation!

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I think everyone is making this more complicated than it needs to be. If you have legitimate expenses for your LLC, they're business deductions, not charitable contributions. If you make donations to your non-profit, those are charitable contributions subject to the normal limits. The key is proper bookkeeping and making sure you're not double-dipping. Don't try to claim the same expense as both a business deduction AND a charitable contribution. Also, make sure your non-profit is properly registered as a 501(c)(3) with the IRS, or your contributions won't be deductible at all.

Has anyone mentioned the substantial contribution rules yet? If your LLC is making donations worth more than $5,000, you'll need a qualified appraisal for non-cash donations. And for donations over $500, you need to file Form 8283 with your tax return. Also, the rules are different depending on how your LLC is taxed. If it's a single-member LLC treated as a disregarded entity, the donation is treated as coming from you personally. If it's taxed as a partnership or S-corp, the deduction passes through to your personal return but with different limitations. This is definitely not a DIY situation - get a good tax professional who understands both business taxation and non-profit rules.

I've been following this discussion with great interest as someone who's navigated similar waters. One critical aspect I haven't seen fully addressed is the potential for excess benefit transactions under IRC Section 4958. When you're the founder/controller of both the LLC and the non-profit, the IRS may view you as a "disqualified person" under the intermediate sanctions rules. This means any transaction between your entities must provide no more than reasonable compensation or fair market value to avoid penalty taxes. The $120K in "donations" you're describing could be scrutinized not just as potentially inflated charitable deductions, but as excess benefits flowing to you indirectly through your non-profit. The IRS might argue that you're effectively paying yourself through the non-profit while claiming tax deductions through the LLC. A few key points to consider: - Document fair market value for any goods/services transferred - Ensure your non-profit's board (if you have independent members) formally approves accepting these contributions - Consider whether some of these expenses might be better classified as program-related investments rather than donations - Be prepared to demonstrate that the non-profit is serving a genuine charitable purpose beyond just providing you tax benefits Given the complexity and audit risk, I'd strongly recommend getting an opinion from a tax attorney who specializes in exempt organizations, not just a general CPA.