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rogaljb
Returning Member

We started a nonprofit 501(C) (3) business and paid for everything. How do we deduct the cost?

We paid all the cost to start a nonprofit. How can we deduct all of the cost? Can we also deduct all the cost of traveling for the nonprofit?

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MichaelMc
New Member

We started a nonprofit 501(C) (3) business and paid for everything. How do we deduct the cost?

If the nonprofit organization has already obtained a determination letter from the IRS, recognizing its exemption under Sec. 501(c)(3), or if the Form 1023 application for said determination has at least been filed, then I would be comfortable counseling you that you can take a charitable contribution equal to the various costs that you have personally paid on behalf of the nonprofit organization. You can also deduct your mileage on behalf of the nonprofit as a charitable contribution, however, you are limited to the charitable mileage rate of 14 cents per mile.

Please be aware that, for 2018, the increased Standard Deduction amounts for all filers are:

  • Single or Married filing separately—$12,000.
  • Married filing jointly or Qualifying widow(er)—$24,000.
  • Head of household—$18,000.
These virtually doubled Standard Deduction amounts will cause roughly 90% of all taxpayers to forego itemizing. If you are among them, you will effectively sacrifice any reimbursement for your charitable expenditures.

If your newly-formed organization has obtained funding, you may wish to consider submitting a reimbursement voucher, with receipts and mileage records attached, and having the organization reimburse you for your actual expenses.

I would advise you, as the founders of this organization, to erect a firewall between your personal finances and the organization as quickly as possible. This minimizes that chance of getting into inadvertent self-dealing and keeps the accounts of the organization free of ongoing reimbursement transactions that could raise audit flags in the future.

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4 Replies
MichaelMc
New Member

We started a nonprofit 501(C) (3) business and paid for everything. How do we deduct the cost?

If the nonprofit organization has already obtained a determination letter from the IRS, recognizing its exemption under Sec. 501(c)(3), or if the Form 1023 application for said determination has at least been filed, then I would be comfortable counseling you that you can take a charitable contribution equal to the various costs that you have personally paid on behalf of the nonprofit organization. You can also deduct your mileage on behalf of the nonprofit as a charitable contribution, however, you are limited to the charitable mileage rate of 14 cents per mile.

Please be aware that, for 2018, the increased Standard Deduction amounts for all filers are:

  • Single or Married filing separately—$12,000.
  • Married filing jointly or Qualifying widow(er)—$24,000.
  • Head of household—$18,000.
These virtually doubled Standard Deduction amounts will cause roughly 90% of all taxpayers to forego itemizing. If you are among them, you will effectively sacrifice any reimbursement for your charitable expenditures.

If your newly-formed organization has obtained funding, you may wish to consider submitting a reimbursement voucher, with receipts and mileage records attached, and having the organization reimburse you for your actual expenses.

I would advise you, as the founders of this organization, to erect a firewall between your personal finances and the organization as quickly as possible. This minimizes that chance of getting into inadvertent self-dealing and keeps the accounts of the organization free of ongoing reimbursement transactions that could raise audit flags in the future.

rogaljb
Returning Member

We started a nonprofit 501(C) (3) business and paid for everything. How do we deduct the cost?

We have not obtained funding. I had some health issues last year and it has set us back some what but we been paying out of pocket. From I understand then we will not even be able to even get that back only a percentage of that from deductions.
Would it be better to wait until we get funding to pay ourselves back? Because we work a ministry and have exceeded our $24,000 in that alone. Plus we donated a lot of items to Veteran's of America about $6200, not counting tithe and giving to. For our giving to VA our savings were only $1700, that's only about 30%.
I am open to any suggestions because we probably donate about 35 - 40% of our income.
John
MichaelMc
New Member

We started a nonprofit 501(C) (3) business and paid for everything. How do we deduct the cost?

First, I hope your health issues will improve. Frankly, I would wait until the organization has funding, because, as you already know, taking the charitable deduction will not make you financially whole.
rogaljb
Returning Member

We started a nonprofit 501(C) (3) business and paid for everything. How do we deduct the cost?

Thank You MichaelMc!
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