TAX INCENTIVES

Federal Enhanced Tax Deductions for Food Donations from ALL business.

As of December 2015, ALL Businesses, including C-corporations, S-corporations, LLC’s, partnerships and sole proprietorships, are eligible for an enhanced tax deduction when food is donated to a 501(c)(3) nonprofit for the care of the ill, needy, or children.

 

What is the enhanced deduction and how do you calculate it?

The enhanced deduction allows eligible businesses to deduct the lesser amount of:

  • (a) twice the basis value of the donated food or
  • (b) the basis value of the donated food plus one-half of the food’s expected profit margin (which is the fair market value of food minus the basis value).

 

For example, if a wholesaler donates apples at a fair market value of $100, and the basis value of the apples was $30, the expected profit margin is $70 ($100-$30).  Under the enhanced deduction, the wholesaler is eligible to deduct the smaller amount of:

  • Basis Value x 2= $30 x 2 = $60, OR
  • Basis Value + (expected profit margin/2) = $30 + ($70/2) = $65

 

The enhanced deduction would be $60, and is substantially higher than the general deduction, which is limited to the basis value of $30.

 

If a business does not account for inventories, they have the option to calculate basis value at 25% of the product’s fair market value.

 

Additionally, the cap on enhanced deductions has increased.  For all businesses, their total annual charitable deductions for food donations cannot exceed 15% of business taxable income for the year.  However, for non- C-corporations, they can receive a total charitable deduction up to 30% of taxable income.

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TAX INCENTIVES

Care to Feed Foundation.

3217 10th Street N., Arlington, VA 22201

202.441.7078  |  info@caretofeed.org