Charitable Giving at Year End: What Businesses Should Know
December is when many small businesses decide to give something back. A food bank donation, a sponsorship or a share of holiday sales can do real good and strengthen your ties with the community. But the US tax rules for charitable gifts changed for 2026, and who actually gets the deduction depends on how your business is set up. Here is what to know before you give this holiday season.
Key takeaways
- From 2026, C corporations can deduct charitable gifts only above a floor of 1% of taxable income, still capped at 10%.
- For sole proprietors, LLCs and S corporations, donations usually pass through to the owner's personal return.
- Individuals who itemize face a 0.5% of AGI floor, while people who take the standard deduction can deduct up to $1,000 ($2,000 joint) of cash gifts to qualifying public charities.
- Get a written acknowledgment for any gift of $250 or more, and make gifts before December 31 if you want them to count for 2026.
- Give because it fits your values and budget first. The tax benefit is usually a bonus, not a reason.
Giving at year end is a tradition for good reasons. Your customers are in a generous mood, GivingTuesday on December 1, 2026 puts generosity in the headlines, and many owners look back on the year and want to share some of what went well.
This guide focuses on the money side: how giving is treated for tax in the US after the One Big Beautiful Bill Act (OBBBA), which records you need, and how to choose the form of giving that suits your business. It is general information, not tax or legal advice. Rules and thresholds change, so check IRS.gov, your state's guidance or an accountant before you rely on any of it. If you are in the UK or Europe, the rules are different, so check GOV.UK or your local tax authority for how business donations work where you are.
Decide why and how much you want to give
Before you think about deductions, decide what you want the gift to achieve. A clear purpose makes the decision easier and the story more honest when you share it.
- Community. Supporting a local food bank, school or shelter close to where you and your customers live.
- Industry or mission. Giving to a cause linked to what you sell, such as a bookshop supporting a literacy charity.
- Team. Letting employees choose a cause, or matching what they give.
- Customers. Inviting customers to take part through a donation per sale or a round-up at checkout.
Then set a budget you can afford. Look at your cash position and what you need for January, which is often a quiet month with tax bills and annual renewals. A gift you can comfortably sustain every year usually does more good than a large one-off gift that strains your cash.
Pro tip
Pick one or two causes and stick with them for several years. Charities can plan around a steady supporter, and your customers will come to associate your business with that cause, which a scattered set of small gifts rarely achieves.
What changed for 2026 in the US
The One Big Beautiful Bill Act changed how charitable deductions work from 2026. The changes affect corporations and individuals differently, so start by working out which group you fall into.
C corporations: a new 1% floor
If your business is a C corporation, it can now deduct charitable gifts only to the extent they exceed 1% of taxable income. The overall cap of 10% of taxable income still applies. In practice, a small corporate gift may produce no deduction at all, because it sits below the floor.
Example
Imagine a C corporation with $200,000 of taxable income. The 1% floor is $2,000, and the 10% cap is $20,000. If it gives $1,500, none of it is deductible under the new floor. If it gives $8,000, roughly the amount above the floor, about $6,000, may be deductible. These numbers are made up and simplified, so ask your accountant how the floor applies to your actual return.
Individuals who itemize: a 0.5% floor
Individuals who itemize their deductions now face a floor of 0.5% of adjusted gross income (AGI). Only giving above that amount counts toward the deduction. This matters to many small business owners, because of how pass-through businesses work (see the next section).
Individuals who take the standard deduction
From 2026, people who take the standard deduction can deduct up to $1,000 of cash gifts, or $2,000 for a married couple filing jointly, to qualifying public charities. Gifts to donor-advised funds do not count for this. If you do not itemize, this is new, and it can make modest personal giving worthwhile from a tax point of view.
Who actually claims the deduction
This is the part many owners miss. Most small businesses in the US are not C corporations. They are sole proprietorships, LLCs taxed as partnerships or sole proprietorships, or S corporations. For these businesses, a donation made in the business name usually does not reduce business profit. Instead it passes through to the owner's personal return, where the individual rules apply.
| Business type | Where the gift usually lands | Main rule to check |
|---|---|---|
| Sole proprietor | Owner's personal return | Itemizing with 0.5% of AGI floor, or the $1,000 / $2,000 cash gift deduction |
| LLC (single or multi-member, default tax status) | Passes through to members | Same individual rules, split by ownership |
| S corporation | Passes through to shareholders | Same individual rules, split by ownership |
| C corporation | Corporation's own return | 1% of taxable income floor, 10% cap |
So if you run a single-member LLC and donate $1,000 from the business account, you will usually treat it as your own personal gift. Whether it saves you any tax depends on whether you itemize, your AGI and your other giving.
Common mistake
Booking a donation as a normal business expense, like advertising or supplies. For most pass-through businesses, a charitable gift is not a business expense and needs to be recorded separately so it flows to the right place on your tax return. Tell your bookkeeper or accountant which payments are donations.
Sponsorship is not the same as a donation
Some business giving is really marketing. If you pay to have your logo on a charity event banner, sponsor a youth team in return for advertising, or buy a table at a gala, part or all of the payment may be treated differently from a pure gift. When you receive something of value in return, the deductible gift amount can be reduced. Ask the charity what, if anything, you received in return, and let your accountant decide how to record it.
Records you need to keep
Good records protect the deduction and make your accountant's job easier. At a minimum, keep:
- Proof of payment for every gift: a bank or card statement, a cancelled check or a receipt from the charity.
- A written acknowledgment for any single gift of $250 or more. It should come from the charity and you should have it before you file. It normally states the amount and whether you received anything in return.
- The charity's details, including its name and confirmation that it is a qualifying organization. You can check an organization's status with the IRS tools on IRS.gov.
- Notes on non-cash gifts, such as the items given, their condition and how you valued them. Larger non-cash gifts can have extra reporting requirements, so ask your accountant.
Keep these with your year-end files so they are in one place when you prepare your return.
Ways a small business can give
Cash is the simplest, but it is not the only option. Each method has its own practical and tax considerations.
Cash donations
Easy to record and easy to prove. Pay by bank transfer, card or check so there is always a record. Avoid cash in an envelope at an event, because it is hard to document.
Donating products or inventory
Giving unsold stock, food or supplies can help a charity and clear your shelves. The tax treatment of inventory donations is more complex than cash and depends on your business type and how you account for stock. Count and record what you give, and ask your accountant before you claim anything.
Giving time and skills
Volunteering your team's time or offering free professional services can be valuable to a charity. Your time itself is generally not deductible, but some out-of-pocket costs of volunteering may be. Keep receipts.
Customer-linked giving
A donation per sale, a GivingTuesday pledge or a round-up at checkout involves your customers. Be precise about what you promise, for example "we will donate $1 for every order on December 1," and then report back on what you gave. If you collect money from customers on behalf of a charity, check your state's rules on charitable sales promotions, which can apply in some states.
Benefits of planned giving
- Supports causes your customers and team care about
- Builds trust and local goodwill over time
- Can reduce tax when the rules and your situation line up
Things to watch
- New floors mean small gifts may bring no tax benefit
- Giving still costs cash, even with a deduction
- Vague promises to customers can damage trust
Timing your gift before December 31
For a gift to count in the 2026 tax year, it generally needs to be made by December 31, 2026. A pledge or a promise to give in January does not count for 2026. If you pay by check, mail it in time. If you pay online, confirm the payment goes through before the year ends, and leave a buffer for bank holidays.
The new floors make timing more interesting. Because a floor removes the first slice of giving each year, some owners consider grouping several years of giving into one year, sometimes called bunching, so more of it lands above the floor. Whether that makes sense depends on your income, your other deductions and your cash flow. It is a conversation to have with your accountant, not a decision to make on December 30.
- Confirm your structure. Check whether your business is a C corporation or a pass-through, since that decides which rules apply.
- Set the budget. Decide what you can give without straining January cash.
- Choose the charity. Confirm it is a qualifying organization and that the gift goes where you want it to.
- Pay before December 31. Use a traceable payment method and leave time for it to clear.
- Collect the paperwork. Get proof of payment and a written acknowledgment for gifts of $250 or more.
- Tell your accountant. Flag each donation so it is recorded correctly, not as an ordinary expense.
Talking about your giving
Sharing what you give can inspire customers and staff, but it needs care. Keep it factual and modest: say what you gave, to whom and why, and thank the people who made it possible. If customers contributed through their purchases, tell them the final amount and thank them directly. Avoid language that makes the cause sound like a marketing tool, and never overstate the impact. If the charity is happy to share a short note about what your gift will fund, that is usually more convincing than anything you write yourself.
Your year-end giving checklist
- Decide the purpose and the one or two causes you will support
- Set a budget that leaves enough cash for January
- Confirm whether you are a C corporation or a pass-through business
- Check that the charity is a qualifying organization
- Make gifts by December 31 with a traceable payment
- Get written acknowledgments for gifts of $250 or more
- Separate sponsorships from pure donations in your records
- Send your accountant a list of all gifts with the paperwork
Frequently asked questions
Can my LLC deduct a charitable donation as a business expense?
Usually not. For LLCs taxed as sole proprietorships or partnerships, and for S corporations, donations generally pass through to the owners' personal returns, where the individual charitable rules apply. Ask your accountant how to record the gift.
Do I need a receipt for small donations?
You need proof of payment for every gift, such as a bank record or a receipt from the charity. For any single gift of $250 or more, you also need a written acknowledgment from the charity.
Can I deduct gifts if I do not itemize?
From 2026, people who take the standard deduction can deduct up to $1,000 ($2,000 for joint filers) of cash gifts to qualifying public charities. Gifts to donor-advised funds do not count toward this amount.
Is it worth giving if there is no tax benefit?
For many owners, yes. The main value of giving is the good it does and the relationships it builds. Treat the tax deduction as a possible bonus, not the reason to give.
Related reading
The bottom line
Year-end giving can be one of the most satisfying decisions you make all year, as long as you plan it. Decide what you want to support, set a budget that protects January cash, and understand how the 2026 rules apply to your business structure. Pay before December 31, keep proof and acknowledgments, and tell your accountant which payments are gifts.
Charitable deduction rules have changed recently and may change again, so check the current guidance on IRS.gov or with a qualified accountant before you make a large gift for tax reasons.
