As a business owner, you understand the importance of giving back to your community. It’s good for the soul and also great for your reputation. Even better, thanks to social media, you have many no-cost opportunities to ensure your charitable activities are seen by your customers.
And here’s something else to keep in mind: It’s okay to give something and get something in return. Your good deeds will help many people, and it’s OK to let your clients know that your company is doing good work by giving back to your community. Additionally, potential employees and current ones like to hear that the organization they work for believes in paying it forward.
Big Benefits of Giving Back
Not only does giving back feel good, but there are also some very beneficial reasons for philanthropy to be among your core values. Here are 4 of them to consider:
- The tax deductions. Tax-deductible donations typically include sponsorships of charities or events, donations of inventory or services and cash donations. In general, you can get deductions on charitable donations of up to 50 percent of your Adjusted Gross Income but be sure to follow the rules closely to avoid any tax problems.
- The employee goodwill. In a 2007 study by Deloitte on volunteering, 62% of 18–26-year-olds questioned said they would prefer to work for a company that offers volunteer opportunities. In other words, you have a better likelihood of attracting and keeping employees when they see that you align with their values of giving back. Volunteering together is rewarding, and it creates important work bonds.
- The free publicity. Sponsoring a charitable program and volunteering your business’ time are great ways to raise awareness about a specific cause and also promote your business in partnership with the organization or event. You can spread the word about the charitable event by posting on your social media platforms and your website.
- The reputation enhancement. A 2010 study by Cone Communications revealed that 85% of consumers have a better outlook on businesses that give to a charity that they care about. Do a little research to identify the most popular charitable causes in your area and use the info to make your charity choices. Giving back is a great way to rally the support of your current customer base and attract new customers as well.
Tips for Choosing Charities & Making Donations
Today’s polished marketing campaigns and social media pages do a great job of legitimizing all kinds of charities. And while we want to believe every charity does the right thing, it’s wise to adopt a “giver beware” attitude. Take time to vet any charity you donate to by using a trusted evaluator site like Charity Navigator. They’ve rated more than 195,000 charities of all types and sizes to ensure your donations are well-spent.
You can browse the site by category and learn some behind-the-scenes facts about how they operate. One tip: Be wary of charities that do extensive lobbying - Certain types of lobbying activity risks the loss of a charity’s tax-exempt status. Confirm the current tax status of your charities of choice.
When you do find a charity that you like, also make sure the organization is a qualified charitable organization under the IRS. Often referred to as 501(c)(3) organizations. Note: Not all tax-exempt organizations are 501(c)(3) status. If in doubt, check with your accountant.
There are also some important tax considerations for your business when it comes to charitable giving. Below are 5 to keep in mind:
- Make sure the tax deduction is eligible - Charitable giving includes the following: cash donations, sponsorship of local charity events, and in-kind contributions such as property, inventory, or equipment.
- Keep good donation records - These rules vary according to donation type (cash, non-cash, out-of-pocket expenses when donating your services). The importance of keeping good records can’t be overstated. Keep canceled checks, bank & credit card statements, and payroll deduction records as proof of donation.
- Consult your tax accountant regarding whether a formal acknowledgment letter is required for your donation - Requirements are related to donation thresholds, # of donations, and the type of organization that receives your donation(s).
- Payroll deductions are different - Keep in mind that contributions made by payroll deduction are treated as separate contributions for each pay period.
- Special note for combining goods and services donations - If you make a payment that is part of goods and services, the deductible contribution is the amount that is more than the value of the goods and services.
We believe in giving back too.
Giving back feels great, but it’s also smart to do it in a way that benefits your business, which can be tricky. It’s vitally important to understand the tax implications and also the tax benefits your business can enjoy by donating dollars, goods, services, as well as your time to local charities. Charitable giving is one of our most important core values at First Service Bank, so if you need any guidance about this or any other financial topic, give us a call at 501-679-7200. We’re here for you.