The rules governing charitable giving are similar for businesses and individuals. If you’re a sole proprietor or LLC, your business taxes are filed on your personal return. In order to gain a tax benefit, you have to itemize your deductions on Schedule A.
If your business functions as a partnership, business income and expenses are passed to the individuals on Schedule K-1 based on the percentage of ownership. If you own 60 percent of the business and your partner owns 40 percent, you could deduct $600 of a $1,000 donation provided that you as an individual qualify for the deduction. Multimember LLCs and S corporations work the same as partnerships.
Partnerships do not pay income taxes. Rather, the income and expenses (including deductions for charitable contributions) are passed on to the partners on each partner's individual Schedule K-1. If the partnership makes a charitable contribution, then each partner takes a percentage share of the deduction on his or her personal tax return.
A donation of cash or property reduces the value of the partnership. For example, if a partnership donates office equipment to a qualified charity, the office equipment is no longer owned by the partnership, and the total value of the partnership is reduced. Therefore, each partner's share of the total value of the partnership is reduced accordingly.
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