Where do your cash register donations go?

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Auditor Garrett Lynch of Ridgefield, Connecticut asks:

How does payout charity work at retail/grocery stores? Recently I was asked to donate $2 when checking out at Stop & Shop. I was told the donation would help Memorial Sloan Kettering Cancer Center in New York. Of course, I said yes, but I wondered: besides MSKCC, who benefits from this donation? If I shopped every day and donated enough to warrant an itemized deduction, would I be allowed to? Would Stop & Shop be considered an exempt organization for this purpose? Or do I just give Stop & Shop $2, who will in turn make the donation and claim the charity deduction? And moreover, how much of that $2 actually goes to MSKCC?

If you donate to the cash register, you could theoretically get a deduction if you wanted to, according to tax experts. But for it to be worth it, it would have to be more than the standard deduction, which is nearly $13,000 for single filers and nearly $26,000 for married couples.

“Usually these are pretty small donations, and keeping a record of them is kind of a pain in the neck,” said Henry Ordower, a law professor at Saint Louis University.

There aren’t many people itemizing their deductions anymore, a downward shift caused by the Tax Cuts and Jobs Act of 2017, said Turney Berry, a partner at law firm Wyatt, Tarrant & Combs LLP. The law, signed by then-President Donald Trump, nearly doubled the standard deduction for single and joint filers. The Tax Policy Center estimated that 90% of households would benefit from the standard deduction in 2018, compared to 70% in previous years.

Ordower pointed out that Congress temporarily allowed filers to deduct charitable donations made in cash, without itemizing, for the 2020 tax year under the Coronavirus Aid, Relief and Economic Security Act, better known as the name of CARES Act. This provision allowed sole and joint filers to deduct up to $300. The deduction, which was extended for the following year, was increased to $600 for co-filers on their 2021 returns. It has now expired.

While you can itemize these deductions if you want, companies asking for them can’t if the money comes from you, the customer, Berry said.

In an emailed statement, a spokesperson for the Stop & Shop supermarket chain said it ran check-in campaigns during “certain weeks of the year” and said “100% of profits would go to the company’s nonprofit partners.

Specifically, the supermarket company raises money for pediatric cancer care through an annual four-week campaign, encouraging customers to donate $1, $3, $5 or round up their purchase to the highest dollar. close. These funds go to the Dana-Farber Cancer Institute in Boston and MSK Kids, a pediatric program at Memorial Sloan Kettering Cancer Center. “This program is not a corporate charitable deduction for us,” the spokesperson said.

Since the campaign began more than two decades ago, Stop & Shop said, it has donated about $100 million to pediatric cancer care and research.

Ordower noted that this does not make these companies charities. “They’re just collecting the money for someone else,” he said.

While these types of campaigns cannot be used as tax deductions, a company could deduct its own donations, Berry explained. If it dedicated a certain percentage of sales, say 5%, to charity, then the business could deduct that 5%. “It’s the company that does it, so they can definitely infer that,” he said.

In comparison, when it comes to these cash register donations, Berry noted that they weren’t counted as income for the company. He cannot therefore benefit from the deduction.

But there are intangible benefits that come with these programs.

“The store is basically telling you that they’re raising money for this good cause. And presumably that makes you feel better about the store and it makes you feel better about shopping there,” Ordower said.

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