Tax planning to classify payments to charities as business expenses has been around since 1935, when lawmakers put limits on the contributions a C corporation could deduct. Today, C corporations, proprietorships, LLCs, and S corporations can make payments to charity deductible as business expenses.

In general, you benefit from the business deduction over the charitable deduction when you

do not itemize your deductions,

pay self-employment taxes, or

suffer deduction phaseouts.

Example 1. You pay $3,000 to a charity. If you take the standard deduction and do not itemize, the $3,000 payment to the charity produces a zero tax benefit. If you make the payment to the charity so that it qualifies as a business expense, you get a $3,000 business deduction. This is a no-brainer.

Example 2. You pay $10,000 to a charity and deduct the entire $10,000 as an itemized deduction. That’s good. But, because you are subject to the 15.3% self-employment tax, you could gain an extra ... Log in to view full article.