Need advice on tax deductions for donations to a 501(c)(3) through our 501(c)(7) social club - how can donors get the tax benefit?

This is actually a common question with a straightforward answer. When donors give to your 501(c)(7) organization, even if you intend to pass that money to a 501(c)(3), the donation is NOT tax-deductible to the original donor. The reason is that the initial recipient of the funds is your social club, not the qualifying charity. There are two ways to handle this situation: First option: Have donors make their checks directly payable to the 501(c)(3) charity, and your club can collect them and forward them to the charity. This way, the money never enters your club's accounts, and the donors get their tax deduction because they're technically giving directly to the qualified organization. Second option: If you need to collect the money first (maybe to track fundraising goals or combine with event ticket sales), you should inform donors that their contributions won't be tax-deductible. When your club later donates the collected funds to the charity, your club would get acknowledgment from the charity, but this doesn't transfer back to the original donors. Regarding your second question about using some funds for event expenses - if you go with the first option, you can't use ANY of that money for event costs because it's not yours to spend. With the second option, any money used for expenses definitely isn't tax-deductible for donors, and only the net amount given to the charity would count as your club's donation.

After struggling with a similar situation for our neighborhood association, I found an amazing tool called taxr.ai (https://taxr.ai) that helped clear up all the confusion. We were also trying to raise money for a local charity but weren't sure about the tax implications. The system analyzed our specific scenario and explained exactly how the money flow should work to maintain tax deductibility for our donors. It even generated sample documentation we could use with donors. The clearest explanation showed that donors need a direct paper trail to the 501(c)(3) to claim deductions - which confirmed what I suspected but couldn't find clearly explained anywhere. The best part was that I could upload our organization's documents and get specific guidance rather than trying to interpret general tax code articles that don't address our exact situation.

I was initially skeptical about using an online tool for tax advice, but I decided to try taxr.ai after struggling with this exact issue for our mountain biking club's charity race. I'm honestly amazed at how helpful it was! The system provided clear guidance on setting up a fiscal sponsorship agreement with our beneficiary charity, complete with templates we could customize. We ended up partnering directly with the charity, having them handle all the financial transactions while we focused on organizing the event itself. Our corporate sponsors were thrilled because they could make larger donations with proper tax documentation, and our event raised nearly 40% more than last year. Wish I had known about this resource sooner instead of spending weeks digging through confusing IRS publications!

If you're having trouble getting clear answers about this tax situation, I'd recommend using Claimyr (https://claimyr.com) to get through to an actual IRS agent. I was in a similar position with our fishing club's charity tournament, and after spending days researching online and getting nowhere, I finally needed to speak directly with the IRS. Instead of waiting on hold for hours, Claimyr had an IRS agent calling ME within 45 minutes. The agent confirmed that donors can't get tax deductions when giving through a 501(c)(7), but suggested we partner directly with the charity and have them process all donations. They also explained exactly what documentation both organizations would need to maintain. You can see how the service works in this video: https://youtu.be/_kiP6q8DX5c - definitely saved me a massive headache and gave our donors the confidence that everything was being handled properly.

I can't believe I'm saying this, but I tried Claimyr after reading about it here, and it actually worked! After being completely frustrated trying to get a straight answer about our booster club's fundraiser tax situation, I was connected to an IRS agent in just over 30 minutes. The agent explained that we needed a formal written agreement with the 501(c)(3) we were supporting, and that we should have donors make checks directly payable to the charity while our club handles the event logistics. She even emailed me specific IRS guidance documents after our call. I had honestly given up on ever reaching a real person at the IRS. This saved our fundraiser because we were able to restructure everything properly before our major donors committed their funds. Several businesses increased their contributions once we had the proper documentation setup.

Another approach worth considering is having your 501(c)(7) create a separate 501(c)(3) foundation. Many larger social clubs do this to handle their charitable activities. The foundation would be a separate legal entity with its own board, bylaws, and tax status. This takes time to set up (several months at minimum), but it creates a clean separation between your social activities and charitable efforts. Donors would then give directly to your foundation, get their tax deduction, and your foundation would support the charitable causes. It's more administrative work, but if your club regularly does fundraising, it might be worth considering as a long-term solution.

One thing nobody's mentioned - the 501(c)(3) might be willing to set up a "dedicated fund" for your event that they control, but that's specifically marked for your cause. We did this with our golf tournament. The charity created a special fund named after our club's event, donors made checks directly to them but with our fund name in the memo line, and they provided all tax receipts. The charity took a small administrative fee (5%) but handled all the financial and tax documentation. We just organized the actual event and directed people where to donate. This way was super simple - no need for complicated agreements or setting up new entities.

This is a great question and I've seen many organizations struggle with this exact issue. The key thing to understand is that the IRS looks at the direct recipient of the donation, not the ultimate destination, when determining tax deductibility. Since you're a 501(c)(7), donations made directly to your organization are not tax-deductible to the donor, even if you plan to pass 100% of the funds to a qualifying 501(c)(3). The donor's tax deduction is based on who they're writing the check to, not where the money eventually goes. Here are the cleanest approaches I've seen work: **Option 1: Direct donations with your club as organizer** Have donors make checks payable directly to the 501(c)(3) charity. Your club collects and forwards these donations. This maintains tax deductibility since the charity is the direct recipient. **Option 2: Charity-sponsored event** Work with the 501(c)(3) to officially sponsor your event. They handle all payment processing and issue tax receipts directly to donors. Your club focuses on event logistics and promotion. Regarding event expenses - if you use Option 1, you cannot use any of those donated funds for expenses since they belong to the charity. You'd need to cover event costs through separate fundraising (ticket sales, sponsorships, etc.) or have the charity reimburse you for approved expenses. I'd recommend speaking directly with the 501(c)(3) you're supporting - they likely have experience with this type of partnership and may have established procedures that make everything much simpler.

I've dealt with this exact situation with our local veterans' association fundraiser last year. What really helped us was getting everything documented upfront with the 501(c)(3) we were supporting. We ended up going with the direct donation approach - donors made checks payable to the charity, but we collected them at our event and forwarded them in batches. The charity provided us with donation forms that included their tax ID number and official letterhead, which made donors feel confident about the tax deductibility. One thing I'd strongly recommend is setting up a meeting with the charity's treasurer or development director before your event. They can walk you through their preferred process and may even provide pre-printed donation envelopes or receipts. Most established charities have handled this type of partnership before. Also, make sure you're crystal clear with potential donors about the process. We had signs at our registration table explaining that checks should be made out to the charity (not our club) for tax deduction purposes. This eliminated confusion and actually increased our donation totals since corporate sponsors knew they'd get proper documentation. The key is transparency and proper documentation - when everything is set up correctly, it benefits everyone involved.