The Tax Benefits of Being a Good Corporate Citizen

Slow-moving inventory is easy enough to discount or liquidate, but there’s another option that can give you more of a benefit: donate that stock or computer equipment to charity.

In general, when you donate inventory or property used in your business, your write-off is limited to the cost of the items or property. But under a special provision, corporations are allowed a higher deduction for gifts to organizations that serve the “ill, needy or infants.”

In this case, a C corporation can deduct the cost of the donated inventory, plus half the difference between the cost and the selling price. The limit under this provision is a deduction of up to twice the cost of the items. In some cases, the deduction is worth more to a corporation than what could be gained through liquidation or discounting. (S corporations, partnerships and sole proprietorships are limited to a straight cost deduction.)

In addition to the inventory tax break, another law provides similar benefits for donations of computer technology to primary and secondary schools.

One clearinghouse that handles distributing inventory to qualified charities is the National Association for the Exchange of Industrial Resources. For more information, go to www.NAEIR.org.

For more details about this tax break, contact your MKS&H tax advisor.

© 2015

About MKS&H:

McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.

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