A few days ago, I saw a post on social media from a taxpayer concerned about what exactly goes on at the grocery or convenience store checkout counter when customers are asked to make a donation. It’s one of many similar posts that you’ve likely seen on sites like Facebook, TikTok, Threads, and X (formerly Twitter). The posts may be well-intentioned, but the narrative they’re pushing is simply wrong.
Background
Stores often offer customers the opportunity to support various charities at the register. Sometimes, customers are asked merely to round up—for example, topping up a $3.86 bill to $4.00, with the extra 14 cents going to charity. Other times, customers can select a custom amount to donate from a touchpad menu.
But a flurry of memes and social media posts—some of which have been around for years—are fueling misinformation about charity at the checkout.
“When you donate at the register, that company is using YOUR donation to fund THEIR tax deduction,” claims one post.
Another rewrote a charitable request to say, “Would you like to let us con you into helping fund our end-of-year tax write-off so that our company can get good press by looking charitable without dipping into our own profits, much of which is wages we’ve stolen from our workers.”
Yet another meme advises taxpayers to donate money directly to charity, warning, “When you donate at the register, that company is using your donation to fund their tax deduction.”
These memes suggest that stores are misleading customers to prop up the company’s own tax returns with charitable deductions. Only, that’s not true.
The Rules
Donations made by customers at checkout are not tax-deductible for the store or business. That’s because the store or business are merely acting as conduits.
Companies can’t claim a deduction for money that they never took into income. Typically, donations are noted as separate line items and you’ll see the same information on your receipt. Those funds don’t end up on a company’s books, and they aren’t eligible to be claimed as a tax deduction. Notably, with Point-of-Sale transactions being captured immediately, it’s easy for companies—and the tax authorities—to confirm that’s what’s happening.
The only taxpayer who may be able to claim the deduction is the customer who made the donation. However, to claim the deduction, you still have to follow the “normal” rules for making a charitable deduction which include:
- Itemize. You must itemize your deductions on Schedule A to take a charitable contribution deduction. That’s where most taxpayers will miss out—under the Tax Cuts and Jobs Act, the standard deduction was doubled, making it less likely that taxpayers will itemize their deductions. In tax year 2021, the last year for which complete data was available, only about 10% of taxpayers itemized their deductions.
- Donations must be made to qualifying organizations to be deductible. Make sure that the charity you’re supporting is tax-exempt—a good rule at the register is to stick to familiar charities. You cannot deduct contributions to specific individuals, no matter how deserving.
- Get a receipt. Cash donations, no matter the amount, must be substantiated by a bank record such as a canceled check or credit card receipt, clearly annotated with the name of the charity or in writing from the organization. The writing must include the date, the amount, and the organization that received the donation. You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your gift from the qualified organization.
- Limits may apply. The amount you can deduct for charitable contributions is generally limited to no more than 60% of your AGI. (Your deduction may be further limited to 50%, 30%, or 20% of your AGI, depending on the type of property you give and the type of organization you give it to.)
- Contributions are tax-deductible in the year they are made. That means that to make your gifts count during the tax year, they must be made by December 31. Credit card charges—even if they’re not paid off before the end of the year—are deductible so long as the amount is captured by year-end. Similarly, checks written and mailed by the end of the year will be deductible for this year even if they aren’t cashed in 2024.
Store Promotions
What about store promotions where stores donate a portion of their proceeds to charity? You’ve seen the ads—stores and restaurants pledge to donate a portion of sales on a particular day or if you buy a specific item. In that event, the business does take those amounts into income and can, therefore, claim a deduction. (Under section 170(b) of the tax code, however, companies are generally limited to a deduction that doesn’t exceed 10% of taxable income.)
Dangerous Claims
While sharing memes and information on social media may feel harmless, misinformation can carry consequences.
One obvious way that these memes can cause harm is to create disincentives to give. Dollars from charity checkouts raise a lot of money. According to Engage for Good, the amount donated at the register increased 24% from 2020 to 2022. In 2022, more than $749 million was raised in the United States by 77 point-of-sale fundraising campaigns that each raised at least $1 million. According to Engage for Good’s biannual survey, these programs have raised more than $6.7 billion over three decades.
Other times, misinformation can take on a life of its own. In May 2022, a customer filed a lawsuit against CVS, claiming that the company collected donations from customers and used them to pay off its own “debt” to the American Diabetes Association (ADA). The lawsuit was a putative class action, meaning that the customer brought the lawsuit on behalf of a potential group of similarly situated individuals who allegedly suffered the same damage.
In its motion to dismiss, CVS clarified that the company had entered into a joint campaign to fight diabetes, which included fundraising at its stores. As part of the campaign, customers were asked on the checkout screen if they wished to make a donation above and beyond the purchase price—if a customer donated, the customer would receive a receipt with the amount of their donation. CVS then forwarded customer donations to the ADA, with the understanding that if total customer donations failed to reach $10 million over the life of the campaign, CVS would cover the shortfall. CVS noted in court documents that the company turned over the donations they collected to the ADA, and those amounts were “indeed tax deductible” to the customers who made the donations.
On September 29, 2023, U.S. District Judge Rachel Kovner, finding the customer’s claims had no merit, dismissed the complaint with prejudice, which means that the decision is final and the matter can’t be reheard.
Bottom Line
In my response to the post on social media, I noted that I understood the reluctance to give at the register—it’s not for everyone. You may not get the warm fuzzies you typically seek when donating to charity since you’re not interacting with them directly, and you may have concerns about record keeping (grocery and store receipts are notoriously easy to lose). You may want to donate directly or through another platform for any number of reasons—but fear of creating a tax deduction for the company shouldn’t be one of them. If there’s a deduction to be had, don’t worry—if you follow the rules, the deduction should be yours.
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