Does discount qualify as a charitable contribution?

by Mitchell Freedman, CPA/PFS

If a hotel reduces the room rate for a 501(c) organization, is the difference considered a charitable contribution?

The short answer is, no. You cannot list the difference between the discounted rate you are giving the 501(c) and your rack (published) rate as a charitable contribution. As a business, you already deduct the costs of the room itself (e.g., furnishings, upkeep, insurance) as ordinary and necessary business expenses. These expenses do not change whether or not you allowed the charity to use the room for free, charged it a discounted rate or charged it your rack rate.

If you write a check to the charity, however, you can deduct that amount as a charitable contribution. Just be sure that there is no quid pro quo. In other words, you could not require that the charity use your contribution to rent one of your rooms.

Mitchell Freedman, CPA/PFS, is the owner of MFAC Financial Advisors, Westlake Village, California. You can reach him at (818) 905-0321.

Have a question for a CPA? Ask it here.