Simply put, political contributions are not tax-deductible. Americans are encouraged to donate to political campaigns, political parties and other groups that influence the political landscape. When it comes time to file taxes, though, many people may not fully understand what qualifies as a tax deduction. So if you support your favorite candidate, you might be wondering if your political contributions are tax-deductible. Though your political contributions may not lower your tax liability, it pays to have a nuanced understanding of where else in your donations and spending you can secure tax deductions.
Do you have complex tax planning questions? Speak with a financial advisor today.
Are Political Contributions Tax-Deductible?
The IRS, which has clear rules about what is and is not tax-deductible, notes that any contributions, donations or payments to political organizations are not tax-deductible. This means that if you donate to a political candidate, a political party, a campaign committee or a political action committee (PAC), these contributions will not be tax-deductible.
Additionally, many people choose to volunteer for political organizations. It’s common for a volunteer to spend money on additional supplies and other items. However, volunteers’ time on a campaign may not see deductions as an hourly service charge or otherwise. Additionally, any out-of-pocket expenses, including supplies, transportation to get to the event and other costs are not tax-deductible.
Although businesses have a stake in political outcomes, companies cannot deduct expenses related to political campaigns. Businesses may donate to campaigns, political parties and PACs, but their contributions are not tax-deductible.
Political Contributions vs. Charitable Donations
People who make political contributions often think that they count as charitable contributions. Charitable contributions are usually tax-deductible, but political contributions are an exception to this rule. To help individuals and businesses discern what is or is not tax-deductible, the IRS has a tool called the Tax-Exempt Organization Search. You can search for the organization you would like to donate to by Employer Identification Number (EIN), name or location to learn if the funds they plan to donate will be tax-deductible.
It is essential to know that any charitable contributions you make in your business or personal tax returns must be itemized when you file your taxes. Therefore, you should keep documentation of all the political contributions you make. You’ll find the itemizations on Form 1040, Schedule A, when you file your taxes. Using Form 1040 will help you to organize your deductions and better understand what is or is not deductible during tax season.
Although political contributions are not tax-deductible, money or property given to churches, temples, mosques and other religious organizations is tax-deductible. Additionally, individuals and businesses can donate to nonprofit schools, hospitals and other organizations and receive deductions. Also, donations to large organizations such as the American Red Cross, United Way or the American Cancer Society are all tax-deductible.
Political Contribution Limits
Even though political contributions are not tax-deductible, there are still restrictions on how much individuals can donate to political campaigns. Individuals can donate up to $2,900 to a candidate committee per election, up to $5,000 per year to a PAC and up to $10,000 per year to a local or district party committee.
If a person is donating to a national party committee, he may donate up to $35,000 per year. The Federal Election Commission sets these limits, and if a person exceeds these donation limits, the campaign cannot use the funds.
Other Tax-Deductible Expenses
There are several expenses that you can deduct from your taxes. Deducting money from your taxable income will help increase the amount of money you receive on your tax return. The IRS has grouped these deductions into five main categories. These categories include:
- Work-related deductions: Work-related deductions include costs for a home office, business entertainment expenses and employee business expenses. For example, many people are adding to their home offices this year. Some of the necessary equipment is tax-deductible.
- Itemized deductions: Most charitable contributions are itemized deductions. Itemized deductions also include property tax, interest expense and home mortgage interest.
- Education deductions: If you are in school or are paying student loans, then you might have education deductions. The interest paid on student loans, work-related educational expenses and teacher educational expenses are also deductible.
- Healthcare deductions: Healthcare deductions include medical and dental expenses as well as health savings accounts (HSAs).
- Investment-related deductions: When you sell an investment or lose money on bad debt, portions of those deficits might be tax-deductible. Additionally, capital losses are a tax deduction.
Although political contributions are not tax-deductible, other deductions can help both individuals and businesses save money on taxes. However, the world of taxes can be quite complex. Therefore, it is wise to partner with a financial advisor or tax professional. They will be able to help you navigate what is and is not tax-deductible. That should lead you to putting your money in the most advantageous places.
Tips for Maximizing Tax Savings
- A financial advisor can help you sort through the myriad of tax questions you may have about contributions and donations. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you discover you’re receive a large tax return every year, you may want to adjust your withholdings. Adjusting your withholdings can help you keep more money during the year. Big windfalls of money are exciting, but letting the IRS have a free loan all year doesn’t sound great either.
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