Round Up Donations Offer Tax Deductions for Consumers
Contributed by: Stephanie Eno, Staff Accountant
“Would you like to round up your total for a local charity today?”
Before you say “yes,” it’s important to understand how to handle these donations from a tax perspective.
There are two ways businesses can help charities with point-of-sale donations. The first comes when a business donates a portion of its sales to a charity. The second comes when consumers “round up” at check out or add a donation to the total bill.
In either case, the business must have an arrangement generally called a “co-venture” with the charity to have point-of-sale donations. Most times, the co-venture arrangement is registered under state law. In about 20 states, this is a regulated activity.
Let’s examine what happens when a business donates some of its sales. For example, when a local sports team holds a fundraiser at a local restaurant, the business deducts the donation. The sales are recorded on the books of the business as well as a charitable donation. Although the friends and family went to the fundraiser, their bill is not deductible, unlike a “round up” donation at checkout.
A “round up” at checkout donation should not impact the business profits or taxes. The donation merely passes through them to get to the charity. The receipt will indicate how much you donated, and the tax deduction is yours if it can be used. In this scenario, the patron does not get to choose the charitable organization, so make sure you are comfortable with the charity the business is supporting.
Although a few cents added to your total at checkout does not seem like it would have much impact, over 500 million dollars is raised annually for nonprofits at checkout counters across the country. Proof that those pennies really do add up!