Finance: Charitable Donations

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Charities across the country are bracing for a reduction of donations in the coming months. But some business owners will still make charitable donations because of moral or religious convictions; others to boost deductions on tax returns. Before you embrace the giving spirit, there are several things to keep in mind, according to financial expert Amy Galbraith, partner at Spa Guardian (www.spaguardian.com), a spa consulting company in Houston, Texas.

Galbraith offers some basic information spa owners should know about making charitable contributions:

• The one you choose must be classified as a 501(c)(3) charity to deduct the donation as a charitable gift on your tax return.
• Gift certificates donated to charities can't be used as a write-off until they've been redeemed. "A lot of owners hoping for a tax deduction mistakenly give out gift certificates at the end of the year," Galbraith says. "But gift certificates are a liability until they're rendered for services."
• If your spa is classified as a C Corp, you can only deduct 10% of your net income in charitable donations. However, if your spa is classified as a Sub S Corp or a partnership, you should be able to take charitable deductions on your personal tax return.
• If you solicit client contributions for a fundraiser or other cause, the client is responsible for getting a receipt for the donation directly from the charity.
• Delegate a specific amount for contributions in your annual budget, and decide which charities will receive donations each quarter, Galbraith says. Keep in mind that you can't tell everyone yes. "An average day spa has one person a day walking in to request a donation," she says. "I tell my clients to say 'unfortunately we've already given away our budgeted amount.'"

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