Whether you regularly donate the extra food inventory from your business to a local food bank or just want to lend a helping hand with some cash or food you purchase at the grocery store, you may be able to deduct the donations on your tax return. You do, however, need to itemize deductions to write off charitable contributions. But most importantly, you'll want to ensure that the food bank you choose can accept tax deductible donations.
Qualified Food Banks
Only the donations you make to “qualified organizations” are deductible as charitable contributions on your return. For this reason, you might want to make sure that the food bank you decide to donate to is tax-exempt, such as Feeding America or one of its affiliates. You can figure this out by navigating to the Internal Revenue Service's website and looking up the food bank's name with the agency's EO Select Check tool. If, however, the food bank is operated by a church, synagogue or mosque, or by a local government agency, it won't show up in EO Select because these types of organizations are automatically tax-exempt without having to file an application with the IRS.
When making cash donations to a food bank, you'll need to hold onto bank records, canceled checks, receipts from the food bank or some other document that shows the amount of each donation to comply with IRS requirements. And each time you make a single cash donation of $250 or more, you'll need to obtain a written acknowledgement from the food bank. Tax-exempt food banks will likely know how to prepare the acknowledgement, but you may want to double-check that it includes the amount of your donation, the value of any goods and services given to you, and if applicable, a statement that the only benefit you received is an intangible religious one. If the acknowledgement also includes the date on which you made the donation, it's not necessary to retain banks records or canceled checks.
Food donated from your pantry or that you purchase from the grocery store is also deductible. To figure out how much to deduct, you'll use the fair market value of all donated food items on the date you make the donation. Fair market value is simply the price you paid for the food. So if you go to the grocery store and purchase 10 cans of corn for $10 – you can take a $10 charitable contribution deduction if you donate them to a food bank.
If you operate a restaurant, deli or any other type of business that deals with food, donations of excess inventory are tax deductible. Special rules apply to donations of food inventory, so you should use the “Donations of Food Inventory Worksheet” in IRS Publication 526 to figure out how to calculate the donation. To take the deduction, you'll also need to obtain a statement from the food bank confirming that it will not sell the food, that using the donated food relates to its tax-exempt purpose and that the inventory will be used to feed infants, the ill or the needy.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.