Editorial · November 20, 2025
Charitable Contributions Deduction: Rules for Businesses
The charitable contributions deduction works differently depending on how your business is set up. A sole proprietor, a partner and a C corporation each claim a gift in a different place and under a different limit. This guide explains the three paths, the receipts to keep and one change that starts next year.
Gifts are not business expenses
A gift to a charity is not the same as a business expense. The IRS says that if a payment is a true charitable gift, you cannot deduct it as a business expense. If it is directly related to your business, it may be deductible as one instead.
The IRS gives two examples. A $15 ad in a church concert program, placed to help sell your products, is an advertising expense. A $100,000 payment to a chamber of commerce committee to bring a convention to your city, meant to increase business activity, is also a business expense. The test is the purpose of the payment, not the name of the group that receives it.
This matters because the two types of deduction follow different rules. A business expense reduces business income directly. A charitable gift follows the charity rules in the tax code, with limits and record requirements.
Sole proprietors, partners and S corporation owners
Sole proprietors, partners in a partnership and shareholders in an S corporation are in a different spot. Their business does not deduct the gift on its own return. Instead, the IRS says they may be able to deduct gifts made by their businesses on Schedule A (Form 1040), the form for itemized deductions.
That has a practical effect. You only benefit if you itemize. For an owner who takes the standard deduction, a business gift may produce no separate tax benefit.
Individual limits also apply. Publication 526 says a deduction for charitable gifts generally cannot be more than 60 percent of adjusted gross income (AGI), and in some cases 20, 30 or 50 percent limits apply, depending on what you give and who receives it. If your total gifts for the year are 20 percent or less of AGI, those extra limits do not apply to you. Gifts above the limit can often be carried forward for up to five years.
C corporations
A C corporation is the exception. The IRS says corporations other than S corporations can deduct charitable contributions on their own income tax returns, subject to limits. The deduction goes on Form 1120.
For this year and earlier years, the limit is generally 10 percent of taxable income. For this test, taxable income is figured before the charitable deduction and before the dividends received deduction. Gifts over the limit cannot be deducted that year, but they can be carried over to the next five tax years.
A corporation that reports on the accrual method has one more option. It can treat a gift as paid in the tax year if the board of directors approved it during that year and the gift is paid by the due date of the return, not counting extensions. The return must include a declaration that gives the date of the board resolution.
A new 1 percent floor starts next year
Congress changed the corporate rule in July 2025. Public Law 119-21, often called the One Big Beautiful Bill Act, adds a 1 percent floor. For tax years that begin after 2025, a corporation can deduct charitable gifts only to the extent that they are more than 1 percent of its taxable income, and no more than 10 percent.
Here is the effect in a simple case. Say a corporation has $10 million of taxable income in the first year the floor applies. It would need gifts above $100,000 before any deduction applies. Tax advisers at KPMG wrote in October 2025 that, without planning, a corporation could permanently lose a deduction equal to 1 percent of its taxable income each year.
The same article notes that the law can be read two ways. Under one reading, gifts above the floor count against the full 10 percent limit, so a company would need gifts of 11 percent of income to reach a 10 percent deduction. Under the other, the top deduction drops to 9 percent. As of this date, the authors say the legislative history does not settle it, so check with a tax adviser before you plan next year's gifts. The new floor does not change the return for this year.
Receipts every business should keep
The rules on proof are the same no matter how your business is set up. Publication 526 says you cannot deduct a cash gift, of any amount, unless you keep a bank record or a written communication from the charity. A bank record shows the charity name, the date and the amount. A canceled check, a bank or credit card statement or an electronic transfer receipt all work.
For a single gift of $250 or more, you need a written acknowledgment from the charity. It must state the amount of cash, and whether the charity gave you any goods or services in return, with a good faith estimate of their value. You must have it by the earlier of the date you file your return or the due date of the return, including extensions.
Gifts of goods follow their own steps. A noncash gift under $250 needs a receipt showing the charity name and address, the date and place, and a description of the property. Larger gifts of property need more, such as Form 8283 for items over $5,000. If you pay more than $75 and get something back, such as a dinner ticket, the charity must tell you in writing that only the amount above the value of the benefit is deductible.
A short checklist
Start by sorting each payment. Is it a real gift, or does it buy advertising or a business benefit? Next, find the right form for your structure: Schedule A for sole proprietors, partners and S corporation owners, and Form 1120 for C corporations. Then check the percent limits, keep a bank record and any written acknowledgment, and mark any carryover for later years. This guide is general information and is not tax advice, so ask a qualified tax professional how the rules apply to your business.