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Pass-through of corporate donations

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Q. I’m setting up an LLC to be taxed as an S corp. Do charitable contributions made by this type of corporation avoid income tax limits? J.C., Lafayette, La.

A. No. With an entity taxed like an S corp, items of income and deduction are passed through to shareholders. Generally, the same rules apply to passed-through deductions as they would to personal deductions. Thus, you cannot avoid income tax limits for charitable donations, but at least you don’t have to pay employment tax on these amounts.

Tip: The reduction for itemized deductions, such as deductions for charitable gifts, begins at $159,950 of AGI on 2008 returns ($166,800 for 2009).

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