Kamala Harris raised over $81 million in the first 24 hours of her campaign, and Trump raised $53 million the day after his criminal trial. With this amount of money rolling into both parties, it’s essential to understand where donations come from and how they’re used. This article delves deeper into the realities of political contributions, the difference between different donation types, and how donors can impact politics.
Clearly, money is a powerful tool in politics. As both sides compete during campaigns to raise more money, you’ll see the numbers hit astronomical amounts before they’re done. The Supreme Court’s decision on Citizens United in 2010 made the impact of financial donations even more crucial. As you read on, we’ll answer the burning question: are political contributions tax deductible? Plus, how donors can make an impact with their contributions.
According to the Federal Election Commission (FEC), anything of value given, loaned, or advanced to influence a federal election is a contribution. The FEC also clearly breaks down the various ways to contribute to political campaigns and the financial limits for each.
As you can see, individuals’ contributions can vary depending on who they give to. Most people don’t have millions to spend and want to make the largest impact where they can. The choices of where to give can be overwhelming. Should you donate to a presidential candidate or a local election? Will your funds be used best in a PAC or party committee?
It’s critical to think about why you’re giving and where it can make the biggest difference. Most individuals will give to a candidate or party to support their political run in an election and will cover the following costs:
Direct donations to local politicians, new campaigns, and campaigns in swing states need funds to cover these costs.
Political Action Committees (PACs) use funds differently and combine gifts to focus on meeting the organization’s goals. If you are significantly interested in one issue over the rest, donating to a PAC may be more beneficial. Be aware, though, that unless you donate a large amount, donating to a PAC may be more beneficial.
Political donations are not tax deductible. This includes donations to political candidates, parties, political committees, and PACs.
The Internal Revenue Service (IRS) can preserve a sense of neutrality by disallowing tax deductions for political campaigns. The goal is also to limit the government from subsidizing and advocating for campaigns or ideas. Before Citizens United, this rule also helped prevent excessive monetary influence over politics.
The IRS only allows tax-deductible donations to 501(c)(3) charities that benefit the public and have the following purposes:
These organizations cannot donate to or advocate for political candidates, campaign for candidates, or political parties. The IRS has made a clear distinction between donations to these organizations and other nonprofits along with their activities.
The following donations are not tax-deductible.
Tax deductions are a compelling reason to give, but they are not the only one. Donors looking to contribute to a political campaign are not doing it for the tax break. These individuals and organizations have beliefs and passions they wish to move forward. So, what can donors do?
Political candidates and parties must share their positions on various topics with the public. Thanks to the internet, it’s also easier than ever to find past votes and comments candidates may have made. Does the candidate reflect your ethics and values? Before you donate to a party or candidate, make sure you’re confident in the stance of the candidate.
Focus on your impact
Most donors can’t donate millions of dollars so it’s essential to understand where you can have the most significant impact. Look at federal, state, and local elections to see where your gift can make a difference. Look at competitive races, swing districts, or ballot measures.
Timing
Comedy and politics are all about timing. What if you donate to a candidate who drops out of the race a week later? Where does that leave your donation, and how do unknown candidates factor in? Can your contribution at the start of their campaign make a larger impact to help them get the word out? Remember to look at how campaigns might use your money to see what your gift can accomplish.
Make Connections
Campaigns aren’t the only place to make a political donation. In today’s world, several organizations have formed to reach agreed-upon goals. If you’re a one-issue voter, a contribution to a PAC, advocacy group, party, or other groups can be more influential when combined with others.
Evaluate
Monitor how candidates and parties are using your donations. How effective have these activities been? As a donor, you now have a voice that campaigns and parties will listen to. Contact the campaigns with your feedback!
Volunteer
Money isn’t the only way to support your favorite candidate. Contact the party or candidate to see where they need volunteers. Social media is another powerful tool that donors can use to support their favorite candidates and advocate for issues. Use your voice to share ads, candidate videos, and more online and in person with everyone you know.
No political contributions are tax deductible. This includes direct contributions to candidates and parties and donations to PACs and other political advocacy groups.
The FEC prohibits corporations and labor organizations from donating to political parties and candidates. These organizations can only donate to Super PACS and Hybrid PACs. Corporations can also set up and administer their own political action committees.
Corporations and labor organizations cannot reimburse individuals who made donations to their PAC through a bonus, expense account, or other compensation. They also cannot extend credit unless it is an ordinary part of their business, give discounts outside of food and beverages, or pay to provide services to political committees. Corporations can offer their services for free.
LLC partnerships with corporations, members, or foreign nationals cannot donate to political campaigns. Federal government contractors and foreign nationals cannot donate to political campaigns. Any donation made in another person’s name is also prohibited.
Political campaign funds can only be used for campaign or political purposes. Any personal use is prohibited. The FEC has an “irrespective test” to distinguish when funds can or cannot be used and includes:
Other personal expenses are determined on a case-by-case basis.
Unlike donations to charitable organizations, political contributions are not tax-deductible. This distinction ensures that taxpayers do not directly subsidize political campaigns or advocacy efforts and upholds the integrity of elections. By maintaining clear boundaries between tax-deductible charitable giving and non-deductible political support, the IRS aims to prevent undue influence and maintain transparency. Understanding these distinctions empowers donors and helps them make informed decisions about how they contribute and engage in the political process. Before contributing to or advocating for a political campaign, be sure to follow the tips we’ve included in this article.
Donorbox provides affordable tools and resources for charitable and political campaigns. If you’ve decided to break into the world of politics, visit our website for resources on how you can legally and effectively increase donations to your campaign and learn about the affordable online features we provide.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor