Chicago Nonprofit Attorney
Are All Donations “Tax Deductible”?
Donations often serve as a circulatory system of an Illinois nonprofit. Without the charity of good-hearted people, many nonprofits would struggle to continue their activities and their mission. As such, to encourage increased charitable giving throughout Illinois, donors can use their charitable donations to lower their taxable income. In fact, in 2010, almost 27 percent of tax filers took advantage of federal tax deductions.
However, it’s important to remember that not all nonprofits qualify as beneficiaries of tax-lowering gifts. In other words, your donation might not be tax deductible, and it mostly depends on the specific nonprofit that you’re donating to.
If you’re the owner (or you want to start) an Illinois nonprofit and you’re looking to obtain your tax-exempt status so that you can receive tax-deductible donations, call the leading Chicago nonprofit lawyer James C. Provenza. We have decades of experience helping Chicago-area nonprofits, and we boast the expertise and know-how to help guide your nonprofit through complex legal matters. For a free consultation, call us today.
In the meantime, you can learn more about tax-deductible donations below.
Who Can Receive Tax-Deductible Donations
For taxing purposes, both Illinois law and federal law classifies nonprofits and other charitable organizations by their mission, their organizational structure, and their activities. In order to register the nonprofit, and make it legal, the nonprofit must register with the IRS for the section of the law that applies to the organization.
For instance, religious and other charitable organizations are considered to be 501(c)(3), and any nonprofit that is 501(c)(3) can receive tax-deductible donations. Therefore, if you’re unsure whether your donation will be tax deductible, it’s important to look for the 501(c)(3) designation.
Nonprofits that might not qualify for tax-deductible donations including social welfare and civic organizations, classified as 501(c)(4) organizations. However, there are two types of 501(c)(4) organizations that do accept tax-deductible donations, and they are some veterans’ organizations and volunteer fire departments.
When you pledge a donation, you are making a promise to pay. Promised donations are not the same as tax-deductible donations; the pledge doesn’t become tax-deductible until you actually give the money. Additionally, if you are making a $10/month donation, only the monthly payments you make during the tax year are considered as tax-deductible.
Donations That Aren’t Technically Donations
Many nonprofits in Illinois use bingo games, raffle tickets, or other lottery-based drawings as a great way to raise money. Unfortunately, many fundraising tickets (or similar lottery-based donations) are not deductible. This is also true with community drives that aim to help an individual or a family with medical costs, loss of a house due to fire, or funeral expenses. If you are donating to a community drive, make sure that the cause is sponsored by a 501(c)(3) organization, such as the Salvation Army or the Red Cross.
Call Illinois Nonprofit Lawyer James C. Provenza
Nonprofit law in Illinois can be very specific, especially when it comes to fundraising, donations, and other charitable giving. By following these laws, however, and making sure that you donate the right gifts to the right types of nonprofits, you can take advantage of tax-deductible donations and lowering your tax payments.
For nonprofits looking to obtain their 501(c)(3) status, or to receive tax-deductible donations, make sure you get the leading legal representation and counsel in the Chicago area by calling James C. Provenza & Associates today. We offer free consultations, so don’t hesitate and call now at (847) 729-3939.