How an LLC Donation Tax Deduction Works

A Limited Liability Company (LLC) offers a flexible business structure, combining liability protection with adaptable tax options. Business owners can support their communities through charitable giving, and these donations can result in a tax deduction. For an LLC, the path to claiming this deduction depends entirely on choices made about how the business is treated for tax purposes.

How LLC Tax Classification Dictates the Deduction

The Internal Revenue Service (IRS) does not have a dedicated tax classification for an LLC. Instead, an LLC must elect how it wishes to be taxed, and this choice is the primary factor in determining the rules for deducting a charitable donation. A single-member LLC is taxed by default as a “disregarded entity,” similar to a sole proprietorship, while a multi-member LLC defaults to a partnership. An LLC can also formally elect to be taxed as an S Corporation or a C Corporation.

These choices create a split between “pass-through” entities and C Corporations. Disregarded entities, partnerships, and S Corporations are pass-through structures where the business itself does not pay income tax. Instead, income, deductions, and credits are passed directly to the owners’ personal tax returns. A charitable donation made by a pass-through LLC is ultimately deducted by the individual members.

In contrast, an LLC taxed as a C Corporation operates as a distinct taxpayer, filing its own return and paying its own taxes. A donation made by a C Corporation LLC is deducted at the corporate level, directly on the business’s tax return.

The Deduction Process for Pass-Through LLCs

For LLCs operating as pass-through entities, the deduction process begins with the business but ends with the individual owners. After the LLC contributes to a qualified charitable organization, the donation is not claimed as a business expense. Instead, it is reported as a separately stated item on the LLC’s annual informational tax return.

For an LLC taxed as a partnership, the total amount of charitable gifts is reported on Form 1065. For an S Corporation, contributions are reported on Form 1120-S. The total donation is then allocated among the members based on their ownership percentage. Each owner receives a Schedule K-1, which details their specific share of the LLC’s financial activities, including their portion of the charitable contributions.

Each owner takes their allocated deduction on their personal tax return, Form 1040, using Schedule A, Itemized Deductions. The deduction is personal and subject to the owner’s individual Adjusted Gross Income (AGI) limitations. Cash contributions to public charities are deductible up to 60% of an individual’s AGI, though this limit is set to revert to 50% in 2026. Donations of property are limited to 30% or 50% of AGI, depending on the property and recipient organization, and excess amounts can be carried forward for up to five years.

The Deduction Process for C Corporation LLCs

When an LLC elects to be taxed as a C Corporation, the process for deducting charitable contributions is contained within the business entity. The individual members are not directly involved in claiming the deduction on their personal returns. The donation is accounted for at the corporate level, providing a direct reduction of the company’s taxable income.

After the LLC makes a donation, the business claims the deduction on its corporate income tax return, Form 1120. The limits on the deduction are based on the corporation’s financial performance, not the owners’ individual incomes.

The deduction for charitable contributions is limited to 10% of the corporation’s taxable income for the year, calculated before deducting the charitable gifts themselves. If the company’s donations exceed this 10% threshold, the corporation can carry forward the unused portion. This excess can be applied against taxable income in the next five tax years, subject to the 10% limit in each of those years.

Substantiation and Reporting Requirements

Regardless of an LLC’s tax status, every charitable donation must be properly documented to be deductible. For any single cash or property donation of $250 or more, the LLC must obtain a contemporaneous written acknowledgment from the charitable organization before filing its tax return. This document must state the amount of cash contributed, describe any property given, and note whether the charity provided any goods or services in exchange for the gift.

The requirements become more detailed for non-cash contributions. If the total deduction for all non-cash gifts exceeds $500 for the year, the LLC must file Form 8283, Noncash Charitable Contributions, with its tax return. This form requires details about the donated property and the recipient organization.

For a non-cash donation valued at over $5,000, a qualified appraisal is required. The appraisal must be conducted by a qualified appraiser, and the appraiser must sign Section B of Form 8283. The receiving charity must also acknowledge receipt of the property by signing the form.