Are Political Contributions Tax Deductible?

On the surface, political and charitable giving seem to have a lot in common: both focus on making a difference in the world. However, in one avenue, a donor is trying to support a political candidate or initiative; in the other, a donor is supporting the good works of an organization for the benefit of the public.

There's another important difference: only charitable giving qualifies for a tax deduction, while political giving does not. That said, it's not always obvious what constitutes a charitable gift and what counts as a political contribution. Here's how to ensure you don't run afoul of the tax code with an improper deduction.

The federal tax code specifically states that there is no deduction for political contributions. Basically, any amount given to a group that seeks to impact an election, lobby for a political agenda, or influence legislation is off the table for a tax deduction. This generally includes:

• Donations of cash, stocks, cryptocurrencies, or any other asset to candidates, political parties, or political action committees (PACs)
• Providing in-kind services, or use of your property (home, private jet, etc.) to candidates, political parties, or PACs
• Campaign contributions for national, state, or local races
• Loans to a campaign
• Time spent volunteering for a campaign

In other words, if you host a political fundraiser at your home, nothing about it will be tax-deductible—not the use of your property, the time you spent planning, the cost of the catered dinner nor any donations made by any attendees. Likewise, businesses can't deduct any kind of political contributions.

Still, you should keep track of the cash you give to a candidate or PAC, along with any in-kind services you provide to a campaign, because there are stringent limits on political contributions. An individual can only give $3,300 to a candidate per election, for example, and many other restrictions come into play for donations to PACs and political parties. The value of in-kind contributions may count toward your contribution limits. But those aren't tax rules: Political contribution limits are enforced primarily by the Federal Election Commission, not the IRS.

If your intention is to give to charity and secure a tax deduction, look for organizations that have 501(c)(3) status with the IRS. Websites like Charity Navigator can help you search for such charities, or you can use the IRS website to check if a specific organization has charitable tax-exempt status. (Fraternal orders and veterans' groups may also to able to accept tax-deductible donations if they meet certain requirements.)

Beware, too, the difference between "nonprofit" and "charity"—they're often used interchangeably, but they're different in the eyes of the tax code. Though all charities are generally nonprofit organizations, not all nonprofits are charities. For example, nonprofit advocacy groups, such as the American Civil Liberties Union and the Sierra Club, have a 501(c)(4) designation and cannot receive tax-deductible donations because they may engage in political activity. Sometimes referred to as social welfare organizations, these groups must operate primarily to promote the common good but can also weigh in on government policy and endorse candidates. (Many of these groups have charitable foundations that are able to accept donations, but the funds cannot be used to support the operations of the main organization.)

Potential tax advantages—or drawbacks—shouldn't solely govern your giving strategy, of course. Many people see political or advocacy-group contributions as a way to positively influence the direction of their community or country, and they give because they want to be part of shaping the future, regardless of the financial benefits.

Whatever your reasons for giving, be sure you understand what can and cannot be deducted. If you misreport, you may not only owe tax penalties; the IRS might take the opportunity to further scrutinize your return. For more insights, consider discussing the tax implications of your giving strategies with your Schwab financial or wealth advisor.