Starting Your Business/Keeping Tax Records
What are Business Expenses
Contributions
Charitable contributions. Cash
payments to charitable, religious, educational, scientific,
or similar organizations may be deductible as business expenses
if the payments are not charitable contributions or gifts.
If the payments are charitable contributions or gifts, you
cannot deduct them as business expenses. However, corporations
can deduct charitable contributions on their income tax returns.
See Charitable Contributions in Publication
542 for more information. Individuals, partners in a partnership,
or shareholders in an S corporation may be able to deduct
charitable contributions made by their business on their individual
income tax returns.
Inventory. You can take a charitable
contribution deduction for inventory items donated to a
qualified charitable organization. Your deduction is limited
to the fair market value of the property on the date of
the contribution less any gain you would have realized if
you had sold the property at its fair market value. You
must remove from opening inventory for the year you make
the contribution any costs for the donated property included
from prior years. These costs are not part of the cost of
goods sold for determining gross income for the year of
the contribution. Use them in figuring the basis of the
donated property. However, you can include (as part of the
cost of goods sold) costs in the year of the contribution
if you treat them as part of the cost of goods sold under
your accounting method. Do not use these costs to increase
the basis of the donated property.
Inventory
Political
Contributions
Important References:
Publication
535
Business Expenses
Publication
542
Corporations
Form
1040 Schedule C Profit or
Loss From Business