When a person gives money to a tax-exempt organization, the donation may or may not be tax deductible. Here are the basic rules: If the organization is a 501(c)(3), the donation is deductible as a charitable contribution. For other types of 501(c) organizations, the donation is generally not tax deductible, but there are exceptions. Those exceptions mainly apply to businesses.
In this part, I’ll give the same explanation I give to clients who ask me which status is best for them when they’re trying to start a not-for-profit.
In the last couple of years, I’ve had the chance to help several small not-for-profits that were trying to get off the ground. One of the first questions they have is: can we be a 501(c)(3)?
A 501(c)(3) organization is one type of tax-exempt organization as outlined in Section 501(c)(3) of the Internal Revenue Code.
A common misconception people have about charitable contributions is that anything given to a not-for-profit counts as a deduction.
Are donations to a 501(c)(4) deductible. Generally the answer is no for individuals, and “maybe” for businesses.