Do You Qualify for a 501c3 Exemption?

A 501c3 exemption is a federal tax law for charitable organizations and other non-profit organizations. Small business owners are not eligible. A small business owner must rely on claiming losses, or taking business tax deductions, to minimize the amount of taxes they owe.

Charitable Donations

Some donations to charitable organizations are tax deductible. Should that organizations qualify for the 501c3 exemption, you can use the donation amount to help reduce your tax liability. The donation does not have to be a monetary donation. For example, if you donate a car or household items to a charity, they will give you a receipt for the value of the items donated. You can then use the value, subject to some rules, to claim a charitable deduction on your taxes.

Charitable Foundation

As part of your retirement and estate planning, you may decide to set up a foundation or non-profit organization that qualifies for a 501c3 exemption. Consult with an attorney for the legal aspects of forming a foundation where you and your family members can be the board members. Keep in mind that setting up a miscellaneous fund for those in need does not qualify for a 501c3 exemption. You may not qualify for a 501c3 exemption, but you can support organizations that do.

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