TRADE DOLLAR DONATIONS
It’s getting tougher these days to support charities and for donors to maximize the benefits of their donations. In the United States trade dollar contributions are treated in the same manner as cash contributions. Donations to 501(c)(3) organizations are tax deductible for the individual or company making the donation. The IRS treats trade dollar donations like they do cash donations.
In order to claim a charitable deduction on your tax return, you must itemize your deductions. You report itemized deductions on Schedule A on your federal form 1040 using lines 16-19. Only donations to qualified charitable organizations are deductible.
EOA helps members donate trade credits to their favorite charities. Simply tell your broker to whom you would like to donate credits, and if they are not already part of EOA, we will tell them the benefits of receiving trade dollar donations. We’ll also help the charity spend those trade credits for what they want.
Then an entity donates products and/or services that they produce or provide to make a living, the IRS only allows them to deduct their actual costs, directly associated with providing said donation.
EXAMPLE: If a painter paints a nonprofits building for free, as a charitable donation. The painter cannot deduct the fair market value of their service, because they make a living painting. Only their actual out of pocket costs associated with providing said painting job are considered their donation, by the IRS. However, if the painter donates a vehicle to a non-profit organization, they’re donation is the market value of said vehicle. Provided they do not make a living selling cars. However, when an entity donates cash, their donation isn’t restricted to their direct costs to earn said cash donation. Instead all cash donations are for the full value of said donated; and likewise, trade dollar donations are treated the same as cash.
Donating trade dollars accomplishes the follow:
• Improves cash-flow: Trade dollars donated in lieu of cash, naturally retains the same amount in cash.
• More affordable: Trade dollar sales are in addition to your regular cash sales, and usually make up less than 10% of your sales; and almost no business’ overhead costs increase from a 10% increase in sales. Therefore, donating trade dollars instead of cash is almost always less expensive.
• Totally deductible: Trade dollar donations, like cash, are 100% deductible compared to donating your business’ goods and services.
Members usually donate trade dollars by requesting that EOA transfer their donation into the nonprofits trade account. As with all EOA transactions, the donations are documented and retained for both parties’ records. If donations are distributed to nonprofits constituents, this is usually performed with the usage of electronic certificates (similar to Groupon) which allows the emailing of certificates for the usage of anyone with complete fraud free accountability. There is no need for anyone to travel or mail any certificates.
EXAMPLE: A hotel used to donate room nights to nonprofit organizations, but was only allowed to use their actual costs associated with providing these rooms as their donation base. But, by transferring/donating trade dollars, instead of room nights to the nonprofits, the hotel would accomplish the same good deeds, while possibly also receiving additional booked room nights if the nonprofit chooses to purchase the hotel’s on-line EOA electronic certificates good for room nights at their hotel. Nonprofits choosing to use their donated trade dollars to purchase room nights from the hotel that made the donation, is immaterial to the status of the donation they received.
Member hotels earn trade dollars in their course of accepting them as payment for their room nights, and/or from other EOA services/products they offer.
THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY. EOA STRONGLY RECOMMENDS THAT READER RECEIVE PROFESSIONAL ADVICE.
The most current IRS information can be found on their websites:
EOA CONTINUES TO MATCH ALL TAX DEDUCTIBLE TRADE DONATIONS!
Anchorage YMCA and the Hospice Organization of Anchorage are once again looking for trade dollar donations in exchange for a tax-receipt for the tax year in which you give the donation.
They are in need of office equipment, lodging, meals, medical and transportation services which can be purchased through EOA. Thereby allowing them to choose which services they'll receive. EOA will see that donor receives proper tax-receipts and EOA will match all trade donations, and that the proper non-profit organization receives the donated trade dollars.