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Credit Card Processing Fees Tax-Deductible?

  • 1.  Credit Card Processing Fees Tax-Deductible?

    Posted 09-08-2021 01:17 PM
    Question: A donor made a $50 donation in memory of her husband. The gift was assessed a $3.95 credit card processing fee which the Business Office required the donor to cover the fee. So the institution received $53.95 from the donor. (Side bar: Institutional Advancement does not require donors to cover credit card processing fees, this donor happened to call the Business Office directly and rather than directing her to make her gift through us via Raisers Edge, they took the gift through their system, Colleague, and their policy is they DO require all credit card payments made through Colleague to also include the processing fee). 

    Is the full $53.95 tax deductible? And a gift of $53.95 is placed on the donors Raisers Edge record.

    Everything I've read online indicates the full amount the donor provides the charity is tax deductible and the institution should recognize $53.95 as her gift and issue an acknowledgement letter supporting that. Our Business Office (Finance) colleagues say No, that the gift amount on her record needs to only reflect $50. 

    Please advise. 

    Thank you, 

    Katie
      

    Katie Rusak

    Director of Advancement Operations

    Institutional Advancement

    krusak@collegeforcreativestudies.edu

    O: 313.664.7861



    ------------------------------
    Kathryn Rusak
    Director Advancement Operations
    College for Creative Studies
    ------------------------------


  • 2.  RE: Credit Card Processing Fees Tax-Deductible?

    Posted 09-08-2021 01:24 PM
    A mandatory fee is not tax-deductible.  Per IRS Publication 526, for a gift to be recognized as charitable, it must be voluntarily given.

    Many institutions ask donors to consider making an additional gift to cover operational expenses.  That could include credit card fees.  When a donor voluntarily opts to make that additional payment, that is tax-deductible.

    But, Katie, I am bothered by what your Business Office did.  Why didn't they refer the donor to you?  Why didn't they send them to your donation site?  And how can they get away with charging almost 8% on a $50 gift?  Most credit card fees are in the 2-3% range.  If their vendor is truly assessing an 8% fee it is time to change vendors!

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Credit Card Processing Fees Tax-Deductible?

    Posted 09-08-2021 01:53 PM
    It is fully tax deductible 

    Sent from my iPhone





  • 4.  RE: Credit Card Processing Fees Tax-Deductible?

    Posted 09-09-2021 08:59 AM
    Kathryn, when someone donates $50 and the cc fees are deducted by the payment gateway, the gift is $50, fully deductible. If the gift is $50, and you ask the donor to increase their gift to cover the fees, that's also charitable and fully deductible. But if you assess a mandatory fee on a contribution, the mandatory fee is not a charitable donation. The business office is technically correct, though this is far from the kind of donor-centric experience you would want!

    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now: