27 Sep, 2021

Find Out If Political Donations Are Tax Deductible!

Find Out if Political Donations Are Tax Deductible!
Written by: - Phil Baker

Whenever the election campaigns come close, everybody is determined to support their favorite parties and help them win. If you are a taxpayer and willing to provide financial support to your candidate, then a question might be popping in your head, are political donations tax-deductible? You may just provide moral support to the party. However, if you are providing economic help, your time and effort to a campaign, then you must know the whole procedure properly.

Have you ever thought of saving tax on your charitable donation to a political campaign? Then you must make it clear that this is not going to happen. You will not be getting any kind of relaxation on the money that you will spend on a political party.

What Is Tax Deduction?

A tax deduction is an expense that decreases the tax liability of an entity by lowering its taxable income. Deductions are expenses incurred by a taxpayer during the financial year that can be applied against or subtracted from their gross income to calculate how much tax is owed to the authorities.

Are Political Contributions A Business Expense? 

Some people believe that if they make political contributions from their business using any form of business assets, the contributions will be counted as the owner's expense. But this is not the case here; the owners have this edge of recognizing the political contributions under the head of business expenses in the financial statements of the business. So, this answers the question 'Are Political Contributions A Business Expense?' that pops in the minds of many while associating their businesses with any political party or campaign. 

You can contribute to the political party by providing financial support, and sometimes these political contributions prove beneficial for your business too. Suppose you make advertisements for your business in a political conference publication, and in this way, you can also recast the contributions as a business promotion. Great, isn't it? Well, there is more. You can buy tickets or arrange dinners for a political party or a candidate, in this way you can also help your business to grow more. However, expenses incurred on a candidate's political campaign cannot be regarded as business expenses.

Why Are Political Donations Not Tax-Deductible? 

IRS is the most valid source to refer to when answering the question like 'Are political donations tax-deductible?' According to the IRS, it is inevitable for a person to get away from his taxes on the money that he spent on a political party of his choice. The IRS has made it clear that this type of money contribution can't be subtracted from your taxes. Below is the given list of things that are not tax-deductible, and if you have made contributions for any of these, then that fraction cannot be reduced from your taxes.

  1. A political candidate to whom you have provided your support

  2.  A political party that has gained financial benefits from you

  3. A campaign committee that you support

  4. A newsletter fund that you provide

  5. Payments that you make to different types of advertisements

  6. Arrangement of dinners or programs that support a political party or political candidates

Are Political Donations Tax Deductible For Business?

Are political donations tax-deductible for business? To be precise, the answer to this question is simply no. These business contributions to the political organizations are not tax-deductible, just like the individual donations and payments. A business tax deduction is valid only for charitable donations. You can confirm whether the organization that you have been choosing for your donation qualifies for your tax-deductible charity or not. You can make use of the Tax-Exempt Organization Search Tool by the IRS.

If Political Donations Are Not Tax-Deductible, Then What Is?

Got the answer to 'Are political contributions tax-deductible? But now, your curious mind won't let you live in peace until you get to know what expenses can save you from tax?

Don't worry because we have got you covered over here too? Following are some of the expenses that can be considered as tax-deductible;

1. Tax-Deduction For Homeowners

Are you buying a new home for yourself? Then you must have gone through the long list of home-related bills and expenses you give each year. The government has taken several steps to provide several tax deductions to homeowners. For instance, the tax deduction is provided by the government for mortgage interest, private mortgage insurance premiums, the tax impact of your new home, and for victims of natural disasters. 

2. Charitable Contributions

If you want to give charity but have no idea whether your money will have tax-deductibility or not, then just take a look at our list of all the examples of charitable donation deductions.

For example, if you want to give money for the refurbishment of your nearby church, temple, or mosque, then there would be tax deductibility on this amount. The same case is with the federal, state, or local government bodies. This is only if you are doing anything for public help and not for the sake of gaining impact on the constitutional level. Not to forget the qualified nonprofit schools such as the American Red Cross etc. Giving your charity to nonprofit hospitals also puts you on the tax-deductibility list.

3. Medical Expenses

Tax is deductible to only qualifying medical and dental expenses. Just ensure that you fulfill all the prerequisites for receiving the deduction. Your all medical bills that are qualified for the medical expense deduction and COBRA insurance costs will be tax-deductible.

4. State and Local Taxes

According to federal tax law, various types of state and local taxes like property, income, or sales taxes are the ones in which there is a certain amount of deduction for the citizens. Also, read our blog on How Much Do You Understand Tax On Bonuses?

Are Political Contributions Tax-Deductible for Corporations?

If you are running a corporation and you want to support your favorite political candidate with the money earned through your corporation. Then you might be wondering: ‘Are political contributions tax-deductible for corporations?’ The answer to the questions is also the same as the aforementioned questions; that is, your political contributions won't lower your tax liability. It will provide you a subtle understanding of where else you can acquire tax deductions in your corporational spendings. 

The IRS has stated its rules quite clearly about what is tax-deductible and what is not. You have to keep in mind these guidelines provided by the IRS that what you contribute, donate or pay through your corporation is tax-deductible or not. Hence, whether you are an individual, a business owner, or a corporation who contributes to a political candidate, a political party, a campaign committee, or a political action committee (PAC), these donations will not be tax-deductible.

You may also like to volunteer for political organizations. A volunteer may spend some of his money on extra supplies and other things. However, the time of a volunteer that he spends on promoting the campaign may not be deducted as an hourly service charge. Likewise, any other expenses like transportation and other supply-related costs are not tax-deductible. Although corporations have their interests in political results, they cannot deduct expenditures related to political movements. Corporations may provide their money to campaigns, political parties, and PACs, but their incomes are not free of tax deductibility. Now you know the answer to ‘Are political contributions tax deductible for corporations?'

Difference Between Political Contributions And Charitable Donations

The question 'Are political donations tax-deductible?' may be answered correctly if people get to know the actual difference between political contributions and charitable donations. People or corporations who spend on political contributions often consider them as charitable contributions. The difference between charitable contributions and political contributions is that charitable donations are usually tax-deductible.

On the other hand, political contributions are an exception to this rule. People need to discern what is or is not tax-deductible. For this purpose, the IRS uses a tool called the Tax-Exempt Organization Search. By using this service of the IRS, you can easily search for the organization you would like to donate to. You can find out the Employer Identification Number (EIN), name, or location easily and learn whether the funds that you are planning to donate to that organization will be tax-deductible or not.

Do you know that all the charitable contributions that you make through your business, corporation, or your tax returns must be itemized while you file your taxes? Therefore, it is advised to keep all the manuscripts of all the political contributions that you make. The listing of itemization will be given on Form 1040; Schedule A. Do check these forms when you file for the taxes. Form 1040 will give you a clear picture of what things are not deductible and also help you to organize your deductions.

Limit Of Political Contribution

Though we all know by now that the answer to the query 'Are political donations tax-deductible?' is that they are not tax-deductible, you still have to restrict yourself on how much you spend and donate on these political campaigns. The limit of donation is $2,800 to a candidate committee per election and up to $5,000 per year to a PAC. If we talk about any regional or district party committee, then the limit of the donation will be $10,000 per year. 

However, if you are contributing to a national party committee, you have the leverage to donate up to $35,000 per year. These limits are set by the Federal Election Commission. You have to keep one thing in mind that if you exceed these donation limits, the campaign cannot use your provided funds.

What If Someone Elects To Give $3 To The Presidential Election Campaign?

Election season is going to roll around. Have you ever noticed before or even checked the box that is on your Form 1040? A statement is written clearly on that form that you can select the box if you want to give $3 to the Presidential Election Campaign Fund. The best thing is the money will not come out of your pocket. The elected presidential candidates will use those funds, but you won't have to pay anything for that. This $3 will also not be coming out of your refund. It is totally up to you whether you want to support the entire process by checking the box. Otherwise, it has nothing to do with your taxes and deductions at all.

What Is An In-Kind Contribution? 

Charity is not just confined to money. Any contribution other than a money donation is called an in-kind donation. It involves substantial goods, personal services, and time.

Is An In-Kind Political Contribution Tax-Deductible?

If the political contribution is done through money or an in-kind donation, it is not going to be tax-deductible. However, it would be the opposite scenario in the case of qualified charities. Both in-kind donations of goods and monetary donations will be tax-deductible. Though political contributions are not tax-deductible, many people still willingly spend their money on the election campaign. People love to support their favorite candidate. They give their time, effort, and support to the candidates and their parties.

If you are one of those people trying to find a tax break, then we must tell you that it is not possible. Do you want to save your money on your taxes this year? Then why not find out whether you are eligible for any of these 10 most overlooked tax deductions

Verdict

The answer to the question 'Are political donations tax-deductible' is simply 'No.' May the entity be an individual, a business, or a corporation, all kinds of political donations come under those opted purely by choice and hence can not be recognized as tax-deductible as per IRS rules and regulations. Who wants to get into all the mess of calculating taxes on their own? How about leaving all the ordeal to your very own online accountant to calculate your taxes efficiently and accurately? After all, is said and done, be sure to keep your proof of income with the online paystub maker.

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