In 2012, we donated a considerable amount in services to one of our clients who has a 501-C. We did this by charging them the full amount then giving a huge discount on each invoice. I am now understanding that this discount is just a loss to us as we cannot itemize these donated services for taxes as ab s-corp.

This year, is it possible to give this client a cash donation each month, then charge them the full amount of services rendered on each invoice? It would be basically giving them money that they would turn around and pay us with. And, if we did this cash donation, would it help us any to itemize the charitable contribution on our personal taxes (as a pass-through) when we are now also having to show the full amount of services as income to the corp?

Any ideas HOW we can help this non-profit client but not hurt our corporation in the process?? Thanks.

#1; With tighter budgets, many charitable organizations are having a tough time affording their contractors. Tax laws provide little incentive for volunteers to step in, as charitable services are not tax-deductible, regardless of the service rendered. Alternative options for you who wants to help include performing a paid service for someone else, then donating the money to the charity; or building an item, donating it and deducting the fair market value of the item. The IRS does allow the following to count as charitable deductions;


Since S corp is a "pass-through" entity, the deduction for the charitable contributions of S corp also passes through to the personal income tax returns of the S corp ownership. Each shareholder can then claim a pro rata share of the corp's charitable donations on their personal income tax returns, as an itemized deduction on Sch A of 1040. This is disadvantageous, because these deductions, combined with other miscellaneous deductions, must exceed a threshold of 2 percent of the shareholder's annual income in order to be deductible.



#2;I guess as mentioned above;

Thanks so much for your reply. Actually, the amount we donated in 2012 would've amounted to about 19% of our annual income. That is, I am assuming you meant our income as indicated on our Schedule K-1 plus our actual salary received. Our gross income, not AGI. So, sounds like maybe this possibly could've helped us if we had paid cash rather than offered just services to this charity.

Correct;as siad, since you own an S corp, the charitable contributions you make in the name of your company can be claimed on your individual income tax return. on the contrary, C corp owners claim charitable deductions on the corporation's tax return on 1120, NOT on their 1040s. To claim charity-related tax deductions, the donations must meet specific IRS rules. Regardless of whether your corporation uses the cash or accrual method of accounting, you can claim tax deductions for only charitable donations that you make by the end of the tax year you're claiming the deduction for.You can deduct up to 50 %of your charitable donation in most cases. If you donate to certain veterans organizations, private foundations or cemetery or fraternal organizations, you are allowed to deduct only up to 30 percent. you can consult with a CPA/an IRS EA i your local area to determine the full tax deduction you can take for your corporation's specific charitable contributions.