Tax Deductions for Non-Profits

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Non-profit companies operate with a defined purpose and use surplus revenues to carry out that purpose as opposed to distributing it to shareholders. Civic organizations, churches and arts institutions such as theaters and dance companies, are examples of non-profit organizations. By applying for a tax-exempt status as 501(C)(3) organization, many non-profit organizations do not have have to pay taxes on net revenues. However, those organizations not exempt from federal and state income taxes may still benefit from a few deductions during tax time.

Advertising and Promotional Costs

  • Non-profit organizations are businesses and are entitled to itemized business deductions under the IRS tax code. According to H&R Block, non-profit businesses can claim deductions for advertising and promotional costs on the IRS Schedule C form. Advertising and promotional costs may include the cost for website construction, the creation of brochures and media advertisement. Since tax-exempt non-profit organizations do not file income taxes, they are not eligible for these deductions.

Business Liability Insurance and Other Insurance

  • With legal claims against non-profit companies on the rise, according to a March 2002 edition of the International Journal of Not-for-Profit Law, many non-profit organizations face the reality of securing business liability insurance. Business liability insurance provides businesses with financial protection in the event of damages to another individual or entity. Publication 529 of the IRS lists business liability insurance premiums as potentially tax-deductible (generally if it is deemed as a necessary business expense). Other forms of insurance that may be tax deductible are the following: insurance that covers property damage and theft, workers compensation insurance and group health insurance.

Legal and Professional Fees

  • Churches, private foundations and theaters may hire the services of attorneys for important legal matters related to the business. However, the IRS states that legal fees paid for the purpose of acquiring business assets are not tax deductible. As such, the fees for these services are considered tax deductible. Other professional services may include hiring a certified public accountant for tax purposes or grantwriters to write grant proposals, since most non-profits depend on grants to operate.

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