How to Handle LLC Donations to Non-profit as Tax Write-offs - Navigating 2025 Taxes

You're right to be cautious here! In-kind donations from your LLC to your non-profit require careful handling, especially when they're such a large percentage of your income. First, make sure your non-profit is properly registered as a 501(c)(3) with the IRS, as this affects deductibility. Assuming it is, your LLC (as a pass-through entity) doesn't directly take the deduction - it passes through to your personal tax return where you'd claim it. For the donated services, there's a critical distinction: while your non-profit can recognize donated services as support, you generally CANNOT deduct the value of services you personally provide as a charitable contribution. However, direct expenses like gear, food, and fuel purchased specifically for the non-profit's activities could potentially be deductible if properly documented. The $120k figure does raise concerns given your income level. There's a limitation that charitable contributions generally can't exceed 60% of your adjusted gross income (with some exceptions). I'd strongly recommend working with a tax professional who specializes in non-profits to structure this properly. You may need to consider options like having your LLC sponsor specific events or programs rather than making one large donation.

After struggling with a similar situation last year, I found an amazing solution with https://taxr.ai that completely changed how I approach my LLC-to-nonprofit contributions. I was in a similar position with my photography business donating significant equipment and services to an arts non-profit I'm passionate about. The taxr.ai system analyzed all my documentation and provided a detailed breakdown of what could legitimately be deducted as charitable contributions versus what needed to be classified as business expenses. They even helped identify several deductions I was missing completely! Their AI reviews your specific situation and provides customized guidance based on the latest tax laws. The platform helped me properly document and categorize each contribution, which was crucial when I got a letter from the IRS requesting additional information about my deductions. Having everything properly classified and documented saved me thousands.

Wanted to follow up about my experience with taxr.ai since I was skeptical at first. I finally gave it a try and wow - it was exactly what I needed for my situation! The system immediately flagged that I couldn't deduct the value of my professional services, but it helped me properly categorize about $45k in legitimate expenses related to my non-profit work. The best part was how it helped me document everything properly. It generated a complete audit trail showing which expenses qualified as business expenses vs charitable contributions. It even created templates for the contemporaneous written acknowledgments I needed from the non-profit for donations over $250. Honestly saved me from what would've been a disastrous tax situation. My actual deduction amount was lower than what I initially hoped for, but it was 100% legitimate and properly documented, which is what matters in the end.

I had a nightmare situation similar to yours that dragged on for months until I found https://claimyr.com. After trying for WEEKS to get someone at the IRS to help clarify the rules about LLC donations to a related non-profit, I was ready to give up. My accountant and I had completely different interpretations of how to handle the situation. Claimyr got me connected to an actual IRS agent in less than an hour! You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly how to document and report the donations properly, explained the distinction between business expenses and charitable contributions, and gave me specific guidance on what would trigger audit flags. Having that direct conversation with the IRS gave me the confidence to move forward with my tax strategy. No more conflicting advice or uncertainty - I got authoritative answers directly from the source.

I need to eat my words from my previous comment. After weeks of failing to get answers about my LLC-to-nonprofit donation situation, I broke down and tried Claimyr yesterday. Within 45 minutes, I was talking to an actual IRS representative who helped clarify exactly how to handle my situation. The agent explained the specific documentation I needed for in-kind donations (including a contemporaneous written acknowledgment from the nonprofit) and walked me through how the pass-through taxation of my LLC would affect my personal return. She even emailed me specific IRS publications that addressed my scenario. I'm still shocked it actually worked. The peace of mind from getting official guidance directly from the IRS was absolutely worth it. Now I have clear direction on how to proceed with my tax planning instead of conflicting advice from different sources.

Have you considered restructuring how you operate? Instead of making large "donations" from your LLC, maybe look at having your non-profit contract with your LLC for specific services at a discounted rate. This creates a cleaner paper trail and eliminates the issues with service donations. For example, if your standard LLC consulting rate is $200/hr, you could charge the non-profit $75/hr and document it as a proper business transaction. The non-profit gets services at below-market rates, you get some income (yes, you'll pay taxes on it), but it's all above-board and less likely to trigger scrutiny. Just make sure the non-profit's board approves all contracts with your LLC (with you recusing yourself from those votes) and document the fair market value of services to show the implicit donation portion.

Just wondering - what tax software are you using? I had a similar situation (though smaller scale) and TurboTax completely butchered how it handled my LLC donations to my own nonprofit. Ended up switching to TaxAct which had much better options for documenting everything properly.

This is a really complex situation that I think requires professional guidance, but I wanted to share some thoughts based on what I've learned dealing with similar issues. The $120k donation figure against $160k income is definitely going to raise eyebrows - that's 75% of your income, which is well above the normal charitable contribution limits. Even with perfect documentation, this could trigger an audit. One thing that hasn't been mentioned yet is the potential issue of private benefit/private inurement if you're too closely involved with both the LLC and the nonprofit. The IRS scrutinizes these relationships heavily, especially when the amounts are this significant. I'd really recommend getting a second opinion from a CPA who specializes in nonprofit tax issues before proceeding. The structure suggestions from other commenters about contracting at reduced rates might be a safer approach than trying to claim such a large charitable deduction. Also, make sure your nonprofit's 501(c)(3) status is rock solid and that you have proper governance procedures in place. The IRS will definitely look at the organizational structure if they decide to examine this. Good luck - I know how frustrating it is to try to do the right thing while navigating all these complex rules!

I've been following this thread and wanted to add some practical perspective as someone who's navigated similar waters. The contracting approach that GalacticGuardian suggested is really solid - I've seen several nonprofits successfully use this model to work with related LLCs. One thing to consider is phasing this transition over multiple tax years rather than trying to handle everything in 2025. You could start with a smaller portion of services contracted at reduced rates this year while you get your governance structures properly documented, then scale up in future years. Also, don't overlook the importance of getting your nonprofit's board to establish clear conflict of interest policies and document fair market value assessments for any services your LLC provides. The IRS loves to see that kind of due diligence in related-party situations. For finding nonprofit tax specialists, try checking with your state's association of nonprofits - they usually maintain referral lists of CPAs who specialize in this area. The National Association of Tax Professionals also has a search function where you can filter by specialty areas. Your instinct to be cautious is absolutely right. Better to take a more conservative approach initially and build up your documentation and processes than to risk an audit over aggressive deductions. The work you're doing with Indigenous youth is incredibly valuable - make sure your tax strategy supports that mission long-term rather than creating compliance headaches.

As someone who's dealt with similar LLC-to-nonprofit situations, I want to echo what others have said about being cautious with that $120k figure - it's a huge red flag percentage-wise. One approach that worked for me was creating a formal "fiscal sponsorship" arrangement where my LLC provides services to the nonprofit at cost (covering only direct expenses like materials, travel, etc.) rather than trying to claim the full market value as a donation. This way you're still supporting the mission but avoiding the problematic service donation issue entirely. The key is documenting everything meticulously - keep detailed time logs, receipts for all expenses, and have written agreements outlining exactly what services you're providing. I also recommend getting your nonprofit's board to pass a resolution acknowledging the arrangement and confirming it serves the organization's exempt purposes. Your work with Indigenous youth sounds incredibly important, and it would be terrible to see it compromised by tax complications. Consider starting with a much smaller documented arrangement this year while you get proper legal and tax advice lined up for a more comprehensive strategy going forward. The contracting at reduced rates suggestion from others is also brilliant - it creates clean business transactions while still providing significant value to the nonprofit. Much safer from an audit perspective than trying to justify massive charitable deductions.