Non-Profits vs. Charities. Tax Deduction Differences

Posted on: February 11th, 2013

Question: I’d like to donate my car to a non-profit organization, but I read that my donation it might not be tax deductible. What’s the difference between a non-profit and a charity and how does that affect my tax deduction?

Answer: Put simply, all charities are non-profits, but not all non-profits are charities. This can impact your tax deduction significantly.  Only charities can qualify for 501(c)(3) tax exempt status which allows donations to be deducted for tax purposes.  The rules in the federal code can be complex, but in the simplest terms, a charity is mostly involved in social causes such as providing relief in disasters, fighting epidemics and other serious ailments, while a non-profit organization is just like any other company except that it does not report profits. Political organizations with permission to lobby the government, such as Disabled American Veterans or the National Rifle Association, are 501(c)(4) organizations, and donations to these types of organizations are generally not tax deductible.

Sometimes organizations exist that provide charitable services, but have not completed the paperwork to receive official recognition—these organizations also cannot receive tax-deductible donations. If you have questions about your cause’s tax exempt status, ask them if they have 501(c)(3) status, or check the IRS’s Exempt Organizations Tool.

Our list of charity partners has been verified and they are all qualified to receive tax deductible donations. If you have found a charity you want to support that is not on our list, please contact us at 866-697-0697 and we will work to bring them on as a partner!

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