Can you donate to your own charity?

[robincaputo]

My husband and I founded a 501(c)(3) Charity in 2015, but had been doing the charitable works for 5 years prior. It is a mobile soup kitchen, so we had purchased and have been using the stoves, tents, water heaters and sinks, etc before we decided to do this "officially".   Can we donate the equipment we own to the charity now and take the deduction?  If so, do we take the amount we paid for the equipment?  Or how much it would be worth in today's market if we were to sell it?

[AmyT · Accepted solution]

Yes, you are able to donate to a charity that you founded.

You can make a tax-deductible donation to any 501(c)(3) charity, regardless of your affilitation with it.

You can claim the fairm market value (FMV) of the equipment that you are donating, which would be equal to the price you could sell it for in today's market.  

Do make sure that the charitable organization gives you a signed receipt for the donation that indicates what was donated, the value of the donation, and states that no goods or services were received in exchange for the donation.

Note:  If the organization is not already doing so, it should make it a practice to provide all donors with a receipt containing the information listed above.

[kellig]

what if I donate money to my non profit ? and it is not equipment, just cash. How much would be exempt from my own taxes

[JamesG1]

Assuming that this is a  legitimate not-for-profit charity that reports annually to the IRS on for 990, there are no restrictions other than what you would encounter with another charitable organization.

[Anastasia1975]

I actually have this same question. I do have a legitimate 501c3 animal welfare organization, however we are new and do not have a donor base yet, so all treatment and care (food, medical, etc.,) for the animals has been out of my own pocket. One question I can’t seem to find an answer to is whether I need a letter from my own not profit as I would give any other donor? 
Also, are credit card payments made to the nonprofit (vet bills for example) deductible or just what has been paid toward the credit card for that year? 

thanks so much!!! 

[BrittanyS]

You can make a tax-deductible donation to any 501(c)(3) charity, regardless of whether you established the 501(c)(3).  You will want to maintain accurate records for the organization as well as yourself and treat your donations as you would any other donor.  The organization will need to issue you a donor receipt like any other donor for tax purposes.  
 

The deduction for business expenses purchased with a credit card is taken in the year of the purchase.  

@Anastasia1975 

[Anastasia1975]

Brittany, Thank you so much for your response. 

I do have another question regarding the rescue  writing a letter to me the same way as it would for any other donor. Do I need a letter for every out of pocket expense (donation) paid by me to the rescue. The difficulty I find here is that the rescue would end up writing me literally hundreds of letters. Is it okay to tally all expenses (donations) and write on single letter? 

[ErnieS0]

No. You do not need a letter for every out-of-pocket expense. You will need a letter for each individual donation of $250 or more.

If all your individual donations are less than $250 each, but together are more than $250, you only need one letter.

The IRS says:

You can claim a deduction for a contribution of $250 or more only if you have a contemporaneous written acknowledgment of your contribution from the qualified organization. 

If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions.

In figuring whether your contribution is $250 or more, don't combine separate contributions. For example, if you gave your church $25 each week, your weekly payments don't have to be combined. Each payment is a separate contribution.

See Contributions of $250 or More

[Anastasia1975]

Wow. It looks like the non profit organization that I own will be writing lot of letters to me, as the the “contributions” (vet bills, food for the rescue cats, medicine for the rescue cats, etc.,) that I have to make in order to keep it running exceed $250 every single time, well over hundreds of times in one year. I was really hoping that I could tally them all together and write one letter for that one totaled amount. Thank you for the response, Ernie. 

Regards, 

Anastasia 

[ShawntellParr]

What if the organization pays a salary to the founder? Is it still favorable to donate to your own non-profit then?

[BrittanyS]

You can still donate to the organization if you have accurate records of the donations.  As ErnieS0 stated,  

"You can claim a deduction for a contribution of $250 or more only if you have a contemporaneous written acknowledgment of your contribution from the qualified organization. 

If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions.

In figuring whether your contribution is $250 or more, don't combine separate contributions. For example, if you gave your church $25 each week, your weekly payments don't have to be combined. Each payment is a separate contribution."

If the organization is a valid non-profit organization and accurate records are kept, you can donate, regardless of who started the organization and if salaries are paid.  

For more information on donating to a charity, see the link below:

Donating to Charity 

@ShawntellParr 

[Anastasia1975]

When doing itemized deductions on schedule A for all of the out of pocket expenses paid to cover the cost of cat food, veterinary, bills, medicine, and anything cat related on behalf. of the 501c3 I founded,  am I just totaling all cash receipts, debit charges, credit card charges  and putting the total under charitable donations or does it go somewhere else?

[Cynthiad66]

Yes you can donate to any qualified 501(s)3 organization.  If you are making donations of goods you can deduct them as other than cash and if you are donating Cash to cover those items mentioned, you deduct as  cash deductions.  

For the items mentioned, deduct them under charitable donations.  Use this link for additional information.

Yes, you can donate to your own 501(c)(3) organization. You can make a tax-deductible donation to any 501(c)(3) charity, regardless of your affiliation with it. It is not technically your own charity as charitable organizations have no owners. However, money donated to charity must be used for charitable purposes.

@Anastasia1975

[Opus 17]

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@Anastasia1975 wrote:

Wow. It looks like the non profit organization that I own will be writing lot of letters to me, as the the “contributions” (vet bills, food for the rescue cats, medicine for the rescue cats, etc.,) that I have to make in order to keep it running exceed $250 every single time, well over hundreds of times in one year. I was really hoping that I could tally them all together and write one letter for that one totaled amount. Thank you for the response, Ernie. 

Regards, 

Anastasia 

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I really want you to see an accountant.  While it is legal to deduct contributions you make to your own charity, it raises the specter of self-dealing, and that can be a tax offense and sometimes even a crime.  For example, it's generally ok to claim a deduction for vet bills you pay, but it might be a problem if the vet is a family member.  

You should really have someone else sign your acknowledgments, someone who is independent and can vouch that you actually contributed something to the organization.  Otherwise, if you are signing letters to yourself, the IRS could feel that's a bit dodgy.

Can you donate cash to the organization and then get a bank card in the name of the organization to pay bills?  That would be cleaner, although you still need someone else to sign your letters.

The organization does not have to issue an acknowledgment letter for every donation, provided they have sufficient internal records that a single letter at the end of the year can be reliable and accurate, and not just a guess or from memory.  The letter will not typically attest to the value of the gift, you must prove the value from your own records.  But the letter needs to be fairly specific as to the items donated or the cost paid.  For example, if you make 10 trips to buy pet food, you need your own receipt that you bought pet food to prove the amount.  You need the letter from the organization to prove you donated the pet food to the organization and didn't just use it for personal use.  A single letter at the end of the year would be enough if it included a list, table or spreadsheet summarizing your gifts throughout the year -- as long as the charity kept good enough internal records that the IRS would believe the letter is accurate and reliable.  And with a related charity, it would really be good to have someone else from the organization sign the letter.  (For example, when I was a church treasurer, and I got reimbursed for expenses, I always had someone else sign the check.)

This is what the IRS says,

Out-of-Pocket Expenses

If you give services to a qualified organization and have unreimbursed out-of-pocket expenses, considered separately, of $250 or more (for example, you pay $250 for an airline ticket to attend a convention of a qualified organization as a chosen representative), related to those services, the following two rules apply.

1. You must have adequate records to prove the amount of the expenses.

2. You must get an acknowledgment from the qualified organization that contains:

   1. A description of the services you provided,

   2. A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred,

   3. A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and

   4. A statement that the only benefit you received was an intangible religious benefit, if that was the case. The acknowledgment doesn't need to describe or estimate the value of an intangible religious benefit (defined earlier under Acknowledgment).

You must get the acknowledgment on or before the earlier of:

1. The date you file your return for the year you make the contribution, or

2. The due date, including extensions, for filing the return.

[Opus 17]

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@ShawntellParr wrote:

What if the organization pays a salary to the founder? Is it still favorable to donate to your own non-profit then?

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If you receive a salary from a charity, you are allowed to donate some of that money back and claim a tax deduction.  However, because the effect of itemized deductions is limited by various factors, it might be more tax benefit to you to take a smaller salary instead.  

To avoid the appearance of self-dealing, if you do donate money back, have some other responsible person sign the receipt.

Also, you can't designate the donation for a specific purpose.  If you donate funds to the general operating account and they are available to be used for any purpose decided by the charity, that's fine.  But if you retain control over the money and say "this money can only be used for this specific purpose that is a priority to me" that will usually not be tax-deductible.  Decisions about how to spend the money should usually not be made by the person who donates the money.  There should be a board or committee that makes those decisions.