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A freelance writer. When Lizzie isn’t writing, she enjoys going on hikes, baking, and spending time with her beloved yellow lab, Sparky.
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Every business needs to manage money effectively well to be profitable, but non-profits need to be even more diligent due to their need for transparency. Because many nonprofits collect private donations, the ability to demonstrate effective use of those monies to donors is critical.
Table of Contents
Office Expense, Including Home Office
If you work for a non-profit and do a major portion of your work from your home office, your expenses will need to be critical to the daily or regular activities of the non-profit.
While considering your home office choices, do be aware that your personal taxes and the tax documentation for your non-profit may overlap. Carefully review which filing choice will be most effective for your personal tax considerations and your organization.
In addition to tracking your home office expenses, you may be able to run your internet expenses through a dedicated hot spot tied directly to your business. This can also be a deduction that can reduce your tax burden. Even if you're running it through your home office, make sure you have the non-profit set up as the bill recipient for this dedicated internet.
Marketing
Your promotional expenses can be a tax deduction. While you will certainly request extra help from local, printers, videographers, photographers, marketing professionals, local newspapers, and regional magazines, there will likely still be some expense to generate promotions for your events and products. Additionally, you may choose to demonstrate the method in which the monies from donors are either directly invested in the non-profit or into a private equity platform that will allow you to grow the funds. Because your donors will need to deduct their contributions to your organization, getting a cohesive demonstration of where those dollars go out to your donors is critical to your next request for dollars.
Licensing and Training
It can be hard for non-profits to offer the salaries that a for-profit business can provide. However, your employees may be able to expand their skill set and their education to both better support your non-profit and improve their knowledge base.
Do take care to review the job descriptions of your employees before investing in training that you plan to write off. This additional training has to be considered essential to the work of the business and the tasks of that employee.
Physical Investments
In addition to tax breaks, non-profits need to carefully review the tax credits that may be available from their state. For example, a non-profit with a physical building may be able to get a new roof, a new parking lot, or a new HVAC system when needed with an application for tax credits.
Each state has its own requirements and its own benefits. If your non-profit has work to be done on a part of your facility that is critical to serving your clients or community, you will need to put together a presentation including quotes and a payment plan. Best of all, many non-profits may get a percentage of the dollars tax-free within a particular time frame of donation collection.
Financial Losses
In addition to tracking your, donations, matches, investment gains, and volunteer time benefits
pay careful attention to tracking your losses. If you store gear, perishables, or electronics in a physical space that is damaged by fire, flood, or theft, your insurance can help, but you may also face a valuation loss that can be a write-off.
You may also be set up to accept physical donations that you can either sell or scrap. For example, if you're given a car and end up scrapping it, the towing fees may be so high as to wipe out any gains you make from the scrap yard.
Your non-profit needs to manage money as though it was a business. Additionally, you can qualify both for tax credits as well as tax deductions. If any portion of your business offers the chance to make a profit that directly funds your charity, you may need to file a 990-T or Taxable form to stay in compliance.
About the Author: Lizzie Howard is a Colorado native who after graduating from the University of Colorado spends her time as a freelance writer. When Lizzie isn’t writing, she enjoys going on hikes, baking for her friends and family, and spending time with her beloved yellow lab, Sparky.