For our food donors: United States tax incentives

This page can be used as a general guideline for federal tax deductions. Please consult with your tax consultant to determine eligibility for your specific organization.

Section 170 of the Internal Revenue Code was enacted in 1976 to encourage donations to charitable organizations. This allows C corporations an enhanced tax deduction for donating their usable surplus property, including food. As of January 1, 2013, food donated by non C corporations in 2012 and 2013 is now also eligible for the enhanced deduction, including sole proprietors, S corporations and limited liability corporations (LLC’s).

Donations that are properly saved, receipted and donated to an approved agency are eligible for a federal tax deduction equal to the cost of goods and up to half of their unrealized gross profit. The deduction, however, cannot exceed twice the basis cost of the contribution.

Example:

Selling price: $4

Cost: $1

Gross Profit equals $3

Half of $3 equals $1.50

Because the maximum deduction cannot exceed two times the cost ($2), the gross profit element

is limited to $1.

Total charitable deduction: $2

Feeding America West Michigan provides donors with accurately and timely receipts, making it easy for the IRS to monitor our processes. Businesses often choose to donate their surplus product to our organization because donations made through our organization qualify for this tax deduction.

If your employees personally donate food to the Food Bank or a pantry, or if your company arranges a food drive, tax benefits do not apply.