A charitable donation belongs on Schedule A, schedule a, personal itemised deduction.
Why schedule a
A sole proprietorship is not a separate taxpayer, so a gift to a charity paid from the business account is your personal contribution. It does not reduce Schedule C net profit and it does not reduce self-employment tax. It is reported with your other charitable giving on the personal return, where whether it produces a deduction depends on your position on itemising and on the income limits for contributions. The one thing that does belong on Schedule C is a sponsorship: if the charity gives you advertising in return, you bought promotion, not made a gift.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for a charitable donation is already written down.
Start for freeWhat a charitable donation is confused with
- Line 8, advertising
- If you get commensurate advertising back, your logo on the team shirts or a banner at the event, the payment is advertising on line 8 and is deductible in full against business income.
- Part III line 36, part iii line 36, purchases less personal use
- Donated inventory has already had its cost absorbed into cost of goods sold, so do not deduct it a second time as a contribution.
- not deductible, not deductible
- A gift to an organisation that is not a qualified charity, or a payment where you received full value in return, produces no deduction anywhere.
Examples that belong on schedule a
- $500 from the business account to a food bank: personal contribution, not a Schedule C expense
- $750 to sponsor a youth team whose shirts carry your business name: line 8 advertising
- $300 raffle prize donated by a shop: cost already in cost of goods sold
- $1,000 to a crowdfunding appeal that is not a qualified charity: no deduction
- $200 gala ticket where $120 was dinner: only the excess over value received can be a contribution
What does not belong here
- Entering the donation in Part V as a business expense, which overstates the Schedule C deduction and understates self-employment tax.
- Deducting donated inventory on top of cost of goods sold.
- Deducting the full face value of a fundraising ticket or auction purchase.
- Treating a political or lobbying payment as charitable, since those are not deductible at all.
What to keep
Keep the charity's written acknowledgement, which is required for larger gifts and which states whether you received anything in return. For sponsorships, keep the agreement describing the advertising, because that document is what makes it a line 8 item.
Other expenses on schedule a
| Expense | Line |
|---|---|
| state income tax on business income | Schedule A |
Related lookups
- Where does Google Ads spend go on Schedule C?
- Where does inventory go on Schedule C?
- Is a car payment deductible on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for a charitable donation is already written down.
Start for free