What Do You Donate to Charity Auctions? (Investor + Flipper Edition)

Question

Hey fellow investors and flippers — curious to hear your take on this.

When local charity auctions come up, most retail businesses donate products, and service-based businesses often give away their time or expertise. But for us — house flippers, investors, real estate pros — it’s a little less obvious.

In the past, I’ve purchased local goods and donated them, which is great… but it usually ends up looking like the local business made the donation (which is fine, but not exactly the goal 😅).

So I’m wondering:
What do YOU donate?
Have you found creative ways to contribute that still tie back to what you do?

Would love to steal — I mean be inspired by — your ideas!

Heather Watkins · Answer

Thank you very much for taking the time to share these considerations. Although I am aware of the tax implications, I do find answers can be very helpful to other investors that read through as I've found very helpful answers from other people's questions.

I was looking for advice on what to put in baskets, items to donate that do not look like the products were donated from the local businesses they belong to, etc. It's simple, so I could ask Chat, but I thought I'd get some ideas from active investors first.

But thank you!

Savannah Wallace · Answer

Hi Heather!

I love that you're looking to give back to local nonprofits! I work with hundreds of organizations, and they are always looking for funding and help. Especially with federal funding being in a precarious state right now, local assistance is so needed. Here are a couple of things to keep in mind when you are looking to donate.

First, if you are thinking about donating your time or professional expertise, be aware that the IRS only allows you to deduct the out-of-pocket expenses directly related to your volunteer work, not the value of your services. For example, if you typically charge $200 per hour and provide two hours of your professional services to a nonprofit, you cannot claim a $400 deduction. Instead, you can only deduct any actual expenses you incurred, such as supplies or travel costs.

Another crucial consideration is the limitation on charitable deductions based on your adjusted gross income (AGI). The rules differ depending on the type of donation and the entity making the donation. For individuals, S-Corporations, or partnerships, cash donations are generally deductible up to 60% of your AGI. Donations of property, on the other hand, are subject to lower limits-typically between 30% and 50%, depending on how long you have owned the asset and the type of property donated. If your business is structured as a C-Corporation, the deduction limit is even lower: both cash and property donations are capped at 10% of the corporation’s net income.

In addition to cash, property, or professional services, you might also consider volunteering your time in a non-professional capacity. While this can be incredibly valuable to the organization, remember that, as mentioned earlier, only your unreimbursed expenses are tax-deductible, not the value of your time.

Before making any donation, always confirm the charitable status of the organization. It is essential to verify that the nonprofit is currently recognized as a tax-exempt 501(c)(3) organization by the IRS. You can check the IRS website to ensure the organization maintains its compliance and eligibility. If the nonprofit has lost its status or is not in good standing, your donation may not be tax-deductible.

Finally, make sure you receive a proper donor acknowledgment letter from the organization. This letter should comply with IRS Publication 1771, which specifies the language and details that must be included for your donation to be deductible. Without this acknowledgment, the IRS may disallow your deduction, regardless of the amount or type of contribution you made.

Hope this helps!