Q:

Subject: Can An LLC Donate Money?

Hi Kerry,
Love the blog, thanks for answering all of my questions thus far, I was just wondering if a business (specifically an LLC) could donate money and deduct it from its income? And not to fret, I’m on my way to getting an actual tax expert in my area, I just have to vet out a few contenders. 🙂

Thanks!

A:

How an LLC deducts its charitable contributions depends on how the LLC is being reported and taxed, which is an extremely important decision you need to make with the assistance of your professional tax advisor.

If it’s a single member LLC and you are reporting it on Schedule C, the contributions are shown on your Schedule A.

If it’s a multi member LLC and you are reporting as a partnership on Form 1065, contributions are passed through to the members on their K-1s, where they end up on the members’ Schedule As.

If it’s being taxed as an S corp on 1120S, it’s handled the same as with a 1065.

If it’s taxed as a C corp, the contributions are deducted on the 1120 with the normal limit of only allowing a current deduction of 10% of that year’s taxable income.   Any excess is carried over to the next tax year.

As you can see, what you may have considered a simple question doesn’t have a quick answer and illustrates the need for a good professional tax advisor before you set up an LLC.

Good luck.

Kerry Kerstetter