March 4, 2013 : Rob Berger - Guest Contributor
How to Capture Political Contributions on Your Tax Return
Ed Note: Did you give to a political campaign in 2012? Campaign finance and tax deduction laws are complex — but there are a few situations where you may be able to deduct donations to non-profit organizations that may be making a difference in the political realm. Rob Berger of Dough Roller explains.
According to Federal Election Committee statistics, 2012 presidential candidates received a total of nearly $602 million in donations. Add that to contributions to political parties, political action committees, and congressional candidates, and the total rises to over $4 billion. That figure tops many small countries’ GDP.
You may be wondering if you can deduct any contributions you made on this year’s tax returns.
The short answer is no. Campaign finance and tax deduction laws are complex. Most political contributions, for the obvious reason of creating a more politically disinterested tax system, are not tax deductible.
There are, however, a few situations in which you can donate tax-deductible dollars to non-profit organizations that may be making a difference in the political realm. Here’s what you need to know:
You’ll have to itemize
If you do have any deduction-eligible contributions from the election year, you’ll have to itemize your deductions to claim them, including charitable contributions to a 501c3, which cannot lobby or give money to politicians. Like other charitable contributions, these eligible contributions are only deducted on an itemized tax return. If you’re taking the standard deduction, you don’t need to be concerned with any of this, unless you plan to itemize next year and want to plan ahead.
Direct contributions to campaigns, parties, and action committees
If you wrote a check for a presidential candidate or even a local mayoral candidate, you’re out of luck when it comes to deductions. Contributions given directly to campaigns and parties are absolutely non-deductible.
So if you contributed to a campaign or party in 2012 thinking you would get a tax deduction, you can’t undo it now. But in the future, you can check with your tax professional before making any political contributions of this sort, as there may be a way to fund your favorite causes while reaping the benefits of a tax deduction.
Donations to charities
Here’s where things get a little trickier. If you want to promote your political ideas while gaining a tax deduction, contributing to certain charities may do the trick. But nonprofit law is every bit as tangled as campaign contribution law, which can make it difficult to figure out which contributions are deductible and which are not.
The main thing you need to know is that only contributions to 501(c)(3) groups are tax deductible. Not sure if you donated to a 501(c)(3) or a different type of non-profit? Here are some of the different types of non-profit organizations, from the National Center for Charitable Statistics:
- 501(c)(3): These tax-exempt organizations can be public charities or private foundations, and they’re the only organizations to which charitable contributions are deductible. These groups are barred from campaigning for or against candidates for political office. However, they can help educate the public and politicians about politically charged issues.
- 501(c)(4): These social welfare non-profits, including advocacy groups and civic clubs, can lobby or participate in campaigns, but they can’t directly contribute money to candidates. Unfortunately, contributions to these groups aren’t tax deductible.
To sum it up, contributions to 501(c)(3) organizations are tax deductible, but these organizations cannot directly lobby or campaign.
Planning for the future
You may be disappointed that many of the contributions you thought were deductible actually are not. The best lesson to take from this potential problem is to plan your giving, whether politically motivated or not, carefully, so that you can get your best possible deduction.
One approach is to donate to the educational arm of a politically active non-profit. For instance, you can’t deduct a contribution to the politically active American Civil Liberties Union, but you can deduct a contribution to their educational arm, the ACLU Foundation.