This page can be used as a general guideline for federal tax deductions. Please consult with your tax consultant to determine eligibility for your specific organization.
Section 170 of the Internal Revenue Code was enacted in 1976 to encourage donations to charitable organizations. The PATH Act of 2015 allows all companies, including farms and small businesses, to claim an enhanced tax deduction when they donate usable food to 501c3 corporations like Feeding America West Michigan.
Donations that are properly saved, receipted, and donated to an approved nonprofit organization are eligible for a federal tax deduction equal to the cost of goods and up to half of their unrealized gross profit. The deduction, however, cannot exceed twice the basis cost of the contribution.
Example:
Selling price: $4
Cost: $1
Gross Profit equals $3
Half of $3 equals $1.50
Because the maximum deduction cannot exceed two times the cost ($2), the gross profit element
is limited to $1.
Total charitable deduction: $2
Feeding America West Michigan provides donors with accurately and timely receipts, making it easy for the IRS to monitor our processes. Businesses often choose to donate their surplus product to our organization because donations made through our organization qualify for this tax deduction.
If your employees personally donate food to the Food Bank or a pantry, or if your company arranges a food drive, tax benefits do not apply.