The more familiar you become with tax law, the more money you potentially stand to save each and every year. One of the more common questions asked is “Are political contributions tax deductible?” Whether it’s your county mayor or the future President of the United States, the rules on taking advantage of these tax deductions are all the same.
Donations are deductible if the organization you give to is a 501(c)(3) tax-exempt charity. This means that the organization has tax-exempt status, which is a special designation obtained from the IRS. Some organizations, mostly churches and religious organizations, are not required to apply for tax-exempt status but others like political campaigns and offices are.
Many political organizations are automatically disqualified from this status. Any donation to a political party, campaign, or action committee is non-deductible. Other non-deductible contributions are those to individual people, labor unions, business associations, for-profit schools, for-profit hospitals, foreign governments, and fees paid to associations or state or municipal governments.
So, if you can’t donate to parties or campaigns, how can you make your political voice heard and reap the benefits of a tax deduction? Well, not all tax-exempt organizations are what you would traditionally think of as charities. While there are plenty of tax-exempt organizations dedicated to feeding the hungry, there are many organizations that express opinions about political issues of all types, across the entire political spectrum.
How can an organization express that opinion? IRC 501(c)(3) tax-exempt organizations are legally prohibited from directly or indirectly campaigning for or against any candidate for political office. This includes financial campaign contributions and verbal or written statements made on behalf of the organization. If an organization does so, it puts its tax-exempt status at risk. That said, there are certain things that tax-exempt organizations can legally do that most people would consider “political.” For example, organizations can hold events or publish documents to educate voters (provided that the materials show no sign of bias). Voter drives or registration efforts, as long as they are conducted in a bipartisan manner, are not prohibited.
Also, public charities can also take part in a limited amount of lobbying. The IRS establishes certain guidelines that dictate how much time and money organizations can spend on lobbying efforts without jeopardizing their tax-exempt status. So, while you can’t make a tax-deductible donation to a candidate or campaign, you can donate to an organization that can lobby candidates about issues you care about. What’s more, not every communication between an organization and an official is considered lobbying. Organizations are allowed to communicate with officials to ask them to make an issue a priority and educate the official about an issue.
So, if you’d like to make your voice heard and save a little on your tax bill, the good news is that it’s doable. You just need to find an organization whose position matches your own. One last caveat is that in order to reap the benefits of a tax-deductible contribution, you’ll need to itemize your deductions on your tax return. So, if you’re one of those Americans who takes the standard deduction, the bad news is that however you express your voice financially, you’ll have to pay using after-tax dollars.
Published or updated February 16, 2013.