Does Your Emergency Assistance Fund Offer Tax-Deductible Donations and Tax-Free Grants?

Many companies set up employee relief funds quickly in times of need, like when a hurricane or other large-scale disaster strikes. As such, these organizations do not always want to jump through all the hoops that are required to ensure that donations can be tax deductible and that grants are tax free. Unfortunately, in doing so the fund becomes much less attractive to potential donors, and the grants much less effective to recipients.

Donors will often choose charities or organizations that allow for tax-deductible donations, because it is a chance to both do some good and receive the tax benefits when tax time rolls around. This is particularly true for those who are contributing regularly or making large donations. In those cases, the tax-deduction could be a powerful incentive to choose your fund for their charitable dollars over another charity. Positioning donations as tax-deductible is one way to get the attention of potential contributors, particularly those who contribute strategically to maximize their tax deductions.

For recipients, paying taxes on a grant received in a time of hardship can take away much-needed funds that could otherwise be used to support themselves and their families. A tax-free grant ensures that the money your employees have contributed to the fund go where it is needed most: their fellow employees. This is also a great selling point when encouraging people to contribute, because employees can feel confident that if they are ever recipients of the grant, the full grant value will be there to help them in their time of need, not become one more tax burden.

If your current fund does not meet these requirements or you are looking to start a new fund that does, consider consulting with an independent public charity who has the expertise to make the tax-optimized administrative process quick and painless.