Many small business owners want to give back by supporting causes that are important to them. Enter charitable donations – a way to give back while building trust with customers and employees, improving your brand visibility in the community, and lowering your tax bill. Here’s how to make the most of charitable giving.

Why Charitable Giving Matters

Donating to charity, whether through food banks, nonprofits, or other charitable missions, shows customers that profit isn’t the only thing that matters to your business. Employees also appreciate seeing their workplace engaged in giving back. But the benefits go beyond goodwill. Charitable giving helps to expand your network, boost your company’s image, and donations can qualify as tax deductions, which reduces your taxable income. It’s a win-win.

How Small Businesses Can Support Charitable Organizations

You don’t need to break the bank to make an impact. Businesses can give in different ways:

• Cash donations: Write a check, make an online payment, or set up an online portal on your website for charitable donations.
• Goods or inventory: Donating unsold products, supplies, or equipment can help nonprofits and free up your storage space.
• Services: If your business offers professional services, donating your expertise can be just as valuable as cash. Your company can also donate time by volunteering at a food bank, homeless shelter, hospital, assisted living facility, or animal shelter.
• Sponsorships: Partner with a local charity for an event, sponsor a youth organization, or donate funds for equipment for a local youth sports program. These types of sponsorships typically include displaying your brand logo – on uniforms, signs, etc. – which raises your visibility within the community.

How Charitable Tax Deductions Work

For a donation to count as a tax deduction, the organization must be a qualified 501(c)(3) nonprofit. If you’re unsure of the organization’s status, check the IRS’s searchable database of nonprofit organizations.

You’ll need to keep accurate records such as receipts, donation letters, or bank statements. For donated goods, property, or equipment that is greater than $250 in value, you’ll need a letter in writing from the organization. And if the value exceeds $500, you’ll need to complete IRS form 8283.

Most businesses can deduct up to 10% of their taxable income in charitable contributions each year, but be sure to double check with an accountant. If you give more than the 10% cap, you may be able to carry the unused amount forward and apply it as a deduction in the following year.

Deciding How Much to Give

The right amount depends on your finances. Some businesses set aside a percentage of profits each year, like 1% to 5%. Others pick a flat dollar amount they can manage.

The key is to be realistic. Giving should never put your business in a cash crunch. Review your budget, talk with your accountant, and decide what amount of giving works best for the season your business is in.

Building Strong Relationships with Charities

Charitable giving isn’t just about tax savings. It’s about networking and building on connections.

Stay in touch with the organizations you support. Ask how your donation is being used and share any PR strategies related to your donation. (Keep in mind that you’ll need to get permission from the organization to use its branding in any marketing or PR efforts.) Share updates with your employees and customers so they see the impact too. Consider volunteering or attending events to show that your commitment is genuine.

When you treat it as a partnership, you can give back to the community and support causes that matter while your business gets positive publicity and a tax deduction.