You can, in the right circumstances, and in 2026 it may be the difference between a real tax break and almost none at all.
Here is the short answer for a business owner who supports a church, a school, or another 501(c)(3): if the payment is directly tied to your business and you make it with a reasonable expectation of a commensurate economic return, you can treat charitable donations as a business expense under Section 162 instead of a personal gift on Schedule A. Done right, that route usually cuts your taxes by more than the identical donation made personally.
The rest of this post is about what "done right" means, because the IRS has been clear that you cannot simply relabel a gift and call it a deduction.
Picture one $10,000 payment to a local nonprofit. You can run it through your personal return or through your business. Same charity, same dollars, two outcomes.
The personal route is the one most owners default to, and it is the weaker one. To give personally, you first have to pull the money out into your own hands, which usually means paying payroll, self-employment, and other taxes on it before any of it reaches the charity. Then the deduction itself only chips away at income tax.
The business route works differently. When the payment qualifies as advertising or promotion, the deduction lands on the business return, a Schedule C or a corporate return, and that changes the result in your favor.
For a Schedule C taxpayer, the difference is concrete: the business deduction reduces both income tax and self-employment tax, while a personal charitable deduction reduces only income tax. It also lowers your adjusted gross income, and a lower AGI quietly improves the value of other deductions, credits, and thresholds tied to it (and there are a lot of those phaseouts and limits). If you run an S or C corporation, the corporate business deduction likewise beats the individual deduction.
This decision always mattered. It matters more now, because OBBBA widened the gap between the two routes.
Three changes are doing the work this year:
Stack those together and many owners now get little or nothing back from the same charitable check they have written for years. If you give regularly, it is worth seeing exactly how the OBBBA charitable giving rules reshaped the personal deduction. The business deduction, meanwhile, was untouched by all of this. That is why the structuring question is suddenly worth real money.
The IRS draws a hard line between a gift and a business expense, and the line is about expectation, not generosity.
A charitable contribution is a voluntary transfer made without receipt or expectation of a substantial financial or economic benefit. A business expense is the opposite: a payment that bears a direct relationship to your trade or business and is made with a reasonable expectation of a commensurate return. If you receive, or reasonably expect to receive, substantial benefits beyond those flowing to the general public, the payment may qualify under Section 162 instead.
Two details in that test trip people up. First, the economic return does not have to actually materialize; the expectation just has to be reasonable at the moment you make the payment. Second, "direct relationship" means the money has to function as something a business does, advertising, promotion, client development, customer retention. The more overt the business purpose, the stronger your position. The IRS confirms this Section 162 versus Section 170 distinction in its own guidance.
So how do you actually treat charitable donations as a business expense in practice? The approved methods fall into two broad families.
The first family treats the payment as a way to put your name in front of the right people.
The simplest version is straightforward sponsorship. A business can sponsor a charity fundraiser, cover the venue, food, or printed materials, and make clear during the event that it is promoting its products or services to the people in the room. Structured as a promotional activity, those costs can qualify as business expenses. The principle held up in Marcell, where the owner of a trucking company contributed cash to a hospital specifically to impress the chairman of the fundraising drive, who happened to be a potential customer. The court allowed the deduction because the owner had a reasonable expectation of a commensurate return.
A close cousin is community branding, where the giving itself becomes a marketing message. In Revenue Ruling 72-314, the IRS approved a stockbroker corporation's payments equal to 6 percent of its brokerage commissions to a neighborhood charity. The firm's office sat in that neighborhood, and the payments were designed to promote the firm, set it apart from competitors, and win business by telling prospects that working with the brokerage helped the local community at no extra cost. The IRS stressed the advertising and competitive nature of the arrangement, and because there was a reasonable expectation that the program would attract and retain customers, the payments were deductible as advertising expenses.
The thread connecting both: the payment is buying visibility and goodwill that you reasonably expect to convert into business.
The second family ties the donation directly to revenue, so the giving and the selling move together.
One approach is to tell customers the business will donate a portion of sales proceeds to charity, which gives them an extra reason to buy from you. That same Revenue Ruling 72-314 blessed this kind of arrangement, treating the payments as business expenses rather than charitable contributions. The logic carries over any time a business advertises that each purchase of a particular product or service triggers a payment to a named charity; because the structure is built to drive revenue, the payment is promotional in character.
A second approach is the charitable coupon. In Revenue Ruling 55-514, a corporation attached coupons to its products: when a customer bought the product and submitted the coupon to a listed charity, the business made a payment to that charity. The IRS ruled that the payments made to redeem those coupons were deductible business expenses.
A third sits somewhere between giving and prospecting. In Marquis, a sole-proprietor travel agent made payments to charities that generated substantial travel business for her, treating them as a substitute for the sales calls her competitors relied on. The court allowed the deductions because the payments were tied to expected or actual business, were paid from the business account, and were kept distinct from her separate, personal charitable gifts.
Notice the recurring mechanics in this family: the payment is tethered to a transaction, and it flows from the business, not the owner.
A good strategy on paper can still collapse without proof, and this is where owners lose deductions they had every right to.
The cautionary case is Hartless Linen Service Co., where a closely held corporation sent checks to 86 churches along with a note asking to be told of prospects who might need its services. The court called the payments charitable contributions, not business expenses, because the corporation could not show they were part of a concrete, trackable promotional program that actually generated business. A vague hope of referrals was not enough.
So treat the paperwork as part of the strategy, not an afterthought:
The documentation is what turns a defensible position into a deduction that holds.
Before you write the next check, run it through this lens. If you support a church, school, or nonprofit and you also own a business, there is a real chance you are giving up tax savings by treating those payments personally. Schedule a Free Tax Strategy Session and we will look at whether your giving can be structured as a legitimate business expense.
The gap between a personal charitable deduction and a properly structured business deduction is wider in 2026 than it has been in years. Higher standard deductions and the new 0.5 percent AGI floor mean many taxpayers will get only limited value from itemized charitable giving.
The Section 162 strategy still works, though. If your payment to the church, school, or charity is directly related to the business and made with a reasonable expectation of a commensurate economic return, the business may deduct it as an advertising or promotional expense. With careful structuring and documentation, treating charitable donations as a business expense lowers your taxes more effectively than making the same payment as a personal gift, and "careful" is the operative word. This is planning worth getting right before year-end, not discovering at filing time.
Sometimes. A payment to a 501(c)(3) can be deducted under Section 162 when it is directly related to your business and made with a reasonable expectation of a commensurate economic return, such as advertising, promotion, or client development. A pure gift with no business purpose is a charitable contribution, not a business expense.
For a Schedule C taxpayer, the business deduction reduces both income tax and self-employment tax and lowers your AGI, while a personal charitable deduction reduces only income tax. S and C corporations also see benefits superior to the individual deduction.
Be overt about the business purpose and keep proof: sponsorship agreements, promotional materials, referral tracking, rebate records, internal memoranda, and a reasonable return-on-investment estimate. Pay from the business account, and keep a separate business checking account if you are a sole proprietor.
This article is for general educational purposes only and should not be treated as tax, legal, or accounting advice. Your facts, entity structure, payroll setup, state rules, and documentation determine whether a strategy is appropriate.