My Employer Made a Charitable Donation on My Behalf: Do I Claim That on My Tax Return?

by Craig Berman
Having an employer make a donation in your name doesn't mean you can write it off.

You’d probably prefer that your employer rewarded your hard work with a bonus, a raise or some extra vacation time. However, your company may choose the altruistic route and make a charitable contribution on your behalf. While that may benefit a cause you hold dear, it won't save you any money on taxes unless it’s done in a very specific way.

Follow the Principles

Employer donations occupy an unclear space in tax law. There’s no Internal Revenue Service bylaw that directly addresses the issue. There are, however, general principles in play. You can deduct contributions to a charitable organization, or contributions designed for its use. Keep in mind that you have to be the one who makes them and you need proof. You can’t simply pledge to give money, nor can you take someone’s word they made contributions for you.

Deduction vs. Credit

Some taxpayers think of charitable donations as a tax credit. That’s not how the IRS sees them, which explains why it's hard to deduct contributions made by employers. What you’re getting when you donate to a charitable organization is a reduction in the amount of your income that's subject to taxes, not a dollar-for-dollar reduction in your tax bill. If you donate $100 to your favorite charity, your tax bill doesn’t go down by that amount, but your taxable income does. If someone else donates $100 for you, your income remains unaffected and therefore your tax burden doesn't change.

Prove It

One of the IRS guidelines about claiming donations on your tax return is being able to prove the donation was made. The proof might include a bank record, a payroll deduction record or a letter from your company containing its name and the date and amount of the contribution. A simple statement from your boss that money was donated on your behalf doesn't qualify. A note from the charity that cites your generous contribution, but no other details, doesn't.

Avoiding an Audit

The proof of a donation made on your behalf generally remains with your employer. To deduct the amount on your taxes you’d have to argue your money was being transferred to the charity, with the company donating cash that would have otherwise gone to you. The company might argue the opposite when its accountants file its return. If your employer claims the same deduction you do, you risk being audited and having the deduction disallowed. Check with your employer to see what their expectations are or consult a tax professional for guidance.

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