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Tax exemption for your non-profit: how does it work? (US)

  • Pioneer

Tax exemption is a great advantage for non-profits, therefore it follows to learn how to go about applying for a tax-exempt status, and whether your organisation qualifies.

 

Tax-exempt means that a non-profit does not pay income tax to the government and that its donors can receive a tax deduction for their donations to the organisation.

In order to qualify for tax-exemption, non-profits must be organised for a lawful purpose in one of these categories:

  • Educational - from providing extra help for special needs children, to funding learning materials for disadvantaged children, educational non-profits aim to help youngsters reach their full potential.
  • Religious - religious non-profits are charities which reflect their religious values and beliefs in the help they give. 
  • Charitable - solely himanitarian aid. 
  • Scientific - working towards the progress of science and medicine.
  • Literary - providing funding for upcoming writers, working to spread the circulation of literature today
  • Testing for public safety
  • Fostering certain national or international amateur sports competitions
  • Preventing cruelty to children or animals

 

     

    Nonprofits seeking tax exemption must not participate in any political campaign or make expenditures for political purposes.

    The organisation must prohibit the distribution of assets or income for the personal gain or benefit of its founders, employees, supporters, or associates.

     

     

    For more information and to apply for tax-exemption, see the IRS website.

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