How Giving Impacts Your Taxes: Are Political Contributions Tax Deductible?

If you gave to political candidates last year, you might be wondering if campaign contributions are tax deductible as you gear up for this year’s tax preparation. If you routinely deduct contributions made to charities on your tax returns, you may assume that the process works roughly the same when you make political donations. 

This is not accurate. It’s essential to distinguish between donations made to charitable organizations and political contributions before getting to work on your unfiled taxes. Only one can actually reduce your tax liability for the year!

Are Political Donations Tax Deductible?

No. “Political contributions deductible status” is a myth. The IRS makes it clear that you cannot deduct contributions that you make to any organizations that aren’t qualified to receive tax-deductible donations. This doesn’t just mean that donations made to candidates and campaigns are excluded from being tax deductible. It also extends to political action committees (PACs). Only donations given to registered 501(c)(3) organizations can qualify for tax-exempt status.

Are Political Contributions Tax Deductible for Businesses?

If you own a business, you understandably have a strong interest in how laws and policies will impact your industry. Unfortunately, that doesn’t mean that the IRS bends the rules to allow you to benefit from your political contributions. If you’re wondering if campaign contributions are tax deductible for your business, the same rules apply. You cannot claim political deductions on your tax return for your business. More specifically, you cannot claim any amount paid in connection with influencing legislation as a business expense. This rule is so strict that the law even prevents political candidates from deducting the money they spend out of their own pockets while running for elected office!

Where does that leave you if you made large political contributions last year? If you were hoping that contributions made to political causes would help to offset your tax bill for the year, it’s time to make a plan to avoid the penalties and interest that could accumulate if you can’t cover your tax bill in full. The good news is that there are many other expenses that you paid for throughout the year that many qualify for deductions this year. This is especially true if you take itemized deductions instead of the standard deduction.

If I Volunteer for a Political Campaign, Can I Deduct My Expenses?

We’ve already covered the fact that money donated to political campaigns will not be tax deductible. However, you may be wondering how the IRS treats the time you donate to candidates. Are donations to political campaigns tax deductible if those donations are volunteered time? The rules are the same for donations of both money and time. So the answer is no: any time you donate to a political candidate, political campaign or political action committee (PAC) is not considered a tax-deductible donation by the IRS.

Is Supporting the Presidential Election Campaign Fund Tax Deductible?

You may have noticed that you have the option to contribute to the Presidential Election Campaign Fund when you complete your tax return. The maximum that you can set aside for this contribution is $3. You might be wondering if that $3 deduction is tax deductible since it’s displayed on your tax form. It is not. Checking the box to make this contribution has no impact on your taxes or deductions for the year.

What Are the Political Contribution Limits for the Year?

While you won’t be getting a tax deduction for your contributions to political candidates and campaigns, there’s a good chance that you still want to throw your support behind a candidate or party. You should know that there are caps for every American when it comes to political donations. Here’s what you can legally give each year without violating any campaign finance laws:

• Up to $2,800 per candidate per election
  
• Up to $10,000 combined for all state, district, and local parties
  
• Up to $106,500 to a national political party
  
• Up to $5,000 per year to PACs

The Federal Election Commission (FEC) sets these caps, but the IRS will have questions for you if you go above them. Be sure to keep good records of your political donations if you routinely give large amounts of money to politicians and causes, because the IRS strictly enforces these limits.

How Can I Give to Tax-Deductible Causes for Tax Purposes?

While giving to a political cause isn’t going to help you lower your tax burden, there are still countless opportunities to give to charitable causes. From soup kitchens to animal rescues and humanitarian organizations, your options are endless.

The only detail to remember is that a charity must be registered as a 501(c)(3) organization for your donation to be legally tax deductible. Under the IRS’s rules, a donation that you give to an individual or group without that 501(c)(3) status won’t count on your taxes. 

It’s also important to note that purchasing goods from not-for-profit organizations won’t count toward tax deductions. For instance, a local church might be having a bake sale to pay for a new roof following a bad storm. You might purchase a slice of carrot cake during the sale to throw your support behind the effort, but that purchase will not be considered a tax-deductible contribution due to the fact that you received a “good” in exchange for the money you gave.

Final Thoughts on Political Contributions and Your Taxes

Are political contributions tax deductible? Unfortunately, you’re not going to be able to turn your political giving into a tax gain this year. That means that you’re out of luck if you were counting on the money you gave to political causes last year to help you lower a tax debt. The good news is that you have many legitimate options for avoiding the consequences of not filing or paying taxes, including things like installment agreements and debt forgiveness.

If you have any questions about figuring out your tax debt while factoring in charitable giving, Tax Group Center is here to help you get on the right page with the IRS. While using deductions to lower your tax burden may help you, it’s also crucial to understand that getting your return filed quickly can help you to avoid severe penalties like liens and levies. Our team of tax professionals and CPAs can help. We’ve been working with the IRS on behalf of our clients for 30 years. If you have tax problems that have grown too serious or confusing to handle on your own, simply contact us today for a consultation. Tax Group Center will work hard to get you on the road to tax relief. Having your taxes prepared by tax experts can help you maximize deductions of all types to reduce your tax liability for the year in full IRS compliance.