- Published By: Chad Silver
- On: August 30, 2021
- Last Updated: October 21, 2022
- See More in: Tax Law
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Did you make any political contributions this year?
While donations to individual candidates or parties may not seem like a major expense, they can add up quickly.
And while many people wonder if they can deduct those contributions on their individual tax returns, the answer is no.
According to the IRS, “Most personal political contributions are not tax deductible.”
Generally speaking, only contributions made to certain tax-exempt organizations, such as non profit organizations that engage in social welfare and advocacy work, may qualify for deduction. So, while donating to campaigns and causes you believe in is important, just be aware that those contributions may not provide any financial benefits come tax season.
Can Corporations Write Off Political Contributions?
A lot of people assume that political contributions are tax deductible like some other donations. Political contributions are not tax deductible, though; individuals cannot deduct contributions made to political campaigns on their federal tax returns, regardless of whether they itemize or claim the standard deduction.
Businesses likewise cannot claim a deduction for political contributions, whether they’re pass-through entities or file a corporate return.
Political contributions are defined as those made to political campaigns. This includes donations made to individual candidates and to support ballot initiatives or political issues that aren’t tied to individuals. None of these contributions is tax deductible for either individuals or businesses.
This guide is designed for people who have made political contributions and are wondering about their deductibility. It explains why political contributions are not tax deductible, and it looks at other types of contributions that may be. It also explains what businesses need to know about making political contributions and incurring expenses related to government affairs.
Why Political Contributions Are Not Tax Deductible
Political contributions often feel like charitable contributions – after all, you’re donating money to help make the world a better place. These expenses, however, are not deductible, unlike charitable donations. Here are the main reasons why:
1. Political Campaigns Are Not Registered Charities
Charitable contributions are tax deductible, but unfortunately, political campaigns are not registered charities. You can only claim deductions for contributions made to qualifying organizations.
2. It’s Written Into the Tax Code
The Internal Revenue Service (IRS) also specifically says political contributions cannot be treated as deductions on individual tax returns. The agency also bans businesses from deducting political expenses.
3. There Are No Deductible Political Expenses
There is no way to get around this rule. Individuals cannot claim deductions for donating cash or merchandising to political campaigns or for any time volunteered with these organizations. Businesses, in the same vein, cannot claim deductions for advertising in programs at political conventions or the costs of attending events that benefit political parties or candidates.
Taxpayers who want to make a positive impact in the world while also claiming a tax deduction may want to explore other avenues. They have the option to donate their money to a charity, rather than a politician, that supports a cause they agree with. They may want to donate money to a registered charity that helps feed the poor, for example, rather than contributing to a politician pursuing the same goal.
Deducting Expenses Related to Lobbying and Government Affairs
Businesses also cannot claim any tax deductions for lobbying expenses. Many companies, however, interpret lobbying expenses too broadly, and they end up missing deductions. Here are the critical facts businesses need to know if they incur costs for lobbying or government affairs.
1. Lobbying Expenses
Businesses that hire lobbyists cannot deduct any related expenses on their corporate income tax returns. This includes all costs incurred in communicating with lawmakers to influence their votes or positions, such as traveling to the politician or wages paid to the lobbyist.
2. Expenses Related to Influencing Legislation
Businesses can generally claim advertising expenses as a business deduction, but if the advertisement seeks to influence the public about an election or a legislative matter, its cost is not deductible. All expenses related to preparing, planning, researching, or coordinating these types of activities are also not deductible.
3. Deductible Government Affairs Expenses
Some expenses related to government affairs, however, may be deductible for businesses. This includes expenses for monitoring, reviewing, and complying with legislation. Companies researching the impact of a new law, for example, can deduct the costs related to that research. Political contributions made to repeal or support a certain law, on the other hand, are not deductible.
Businesses that incur political expenses need to have a solid grasp of the distinctions explained above. They need to ensure that they don’t try to illegally deduct nondeductible political contributions or lobbying expenses. They also need to be certain that they aren’t overlooking deductions for government-related expenses that don’t seek to influence politics or legislation.
Pitfalls to Avoid When Dealing With Political Contributions
Businesses and individuals that make political contributions need to understand the rules, and they also need to watch out for common pitfalls. Here are some mistakes to avoid:
Confusing Federal and State Taxes
Political contributions are not deductible on your federal return, but they are deductible in Montana and can lead to a tax credit in Arkansas, Ohio, and Oregon.
Political Contributions as Public Relations or Advertising Expenses
Pass-through businesses sometimes classify charitable contributions such as sponsoring the local youth soccer team as PR or advertising expenses, but this loophole can never be applied to political donations.
Assuming All Government-Related Expenses Are Nondeductible
As explained above, costs incurred to research the impact of laws are deductible for businesses, even though lobbying or making political contributions is not.
Taxpayers who want to avoid mistakes are well-advised to work with a professional. A tax specialist can help you avoid understating or overstating your tax liability, and they can guide you past these common pitfalls.
can my employer see my political contributions?
It may come as a surprise, but your employer can indeed see your political contributions. Federal law prohibits employers from discriminating against employees on the basis of their political beliefs or activities. However, this does not prevent employers from accessing public records of political donations made by their employees. This information is often available through campaign finance disclosure laws, which require candidates and organizations to disclose their campaign contributions.
In addition, some states have laws that specifically require the disclosure of political contributions by government contractors and their employees. While it may seem like a breach of privacy, it is important to remember that any donation made with a personal credit card or check is considered a public record and can be accessed by anyone who conducts the appropriate research. To ensure confidentiality, consider contributing through methods such as anonymous cash donations or trustee-directed contributions. Ultimately, it is important to exercise your right to participate in the political process, but being aware of potential privacy concerns can help protect your personal and professional reputation.
Contact Silver Tax Group Today for Help With Your Tax Problems
The U.S. tax code is one of the most complicated in the world, and a mistake on your return can cause you to face additional tax liability as well as interest and penalties.Silver Tax Group can advise you on any tax debts and other IRS problems. We can help if you erroneously claimed a political deduction, failed to claim deductible expenses, forgot to file a return, or are dealing with any other issues with the IRS. Contact our office today with any questions about tax rules on political contributions.
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