A business that donates a gift certificate to a qualified nonprofit organization may be eligible for a tax deduction when filing its income tax return. Under Internal Revenue Service tax codes for tax-exempt organizations, gift certificates and gift cards are non-cash donations. Your business must confirm that the donation qualifies for a tax deduction and use the appropriate IRS form, based on the type and value of the donation.
Under IRS rules, charitable contributions are eligible donations made to qualified nonprofits. The donations are made without conditions. The donor may deduct the total amount of the donation only if no benefit was received in exchange for the charitable contribution. Charitable contributions include cash donations, property, investments and non-cash donations, which include gift certificates. IRS Publication 526, "Charitable Contributions," provides detailed instructions for claiming charitable tax deductions. Find additional information about non-cash donations in IRS Publication 561, "Determining the Value of Donated Property."
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Confirm that the nonprofit organization to which you donate the gift certificate qualifies for charitable tax deductions. The IRS allows tax deductions for donations to organizations granted tax-exempt status under section 501(c)(3) of the tax code. Qualified nonprofits may be religious organizations, nonprofit hospitals and schools, volunteer fire departments, veterans' organizations and local, state and federal government agencies. Some nonprofits, such as political groups and civic leagues, do not qualify for charitable tax deductions. Ask the nonprofit about its tax-exempt status or visit the IRS website to look up the information on its charities page.
Charitable contributions are reported on the tax return form for the year in which the donation was made. File your taxes using Form 1040 and use Schedule A to itemize your deductions. You must itemize to take charitable deductions. Include IRS Form 8283 with your tax return to report non-cash contributions that exceed $500. Your business then may deduct the value of the gift certificate. For instance, your retail business may deduct $100 for a $100 gift certificate donated to a local charity.
Documentation and Records
Maintain documentation in your records to verify the donation of the gift certificate. Retain the documentation for use if an audit occurs. You may choose to keep a copy of the gift certificate and the acknowledgement letter sent to your business by the nonprofit organization. Make sure your documentation includes the name of the nonprofit and the date and amount of the donation.