Are Higher Education Sponsorships Tax-Deductible?


May 24, 2021
are higher education sponsorships taxable

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Sponsorships provide an opportunity for your company to give to the developing mind of the next generation. They are an act of community goodwill that helps both the students receiving the sponsorship and the sponsor. Before connecting with a college group or organization in this way, you may ask, “are higher education sponsorships tax-deductible?”

The simple answer to this question is “yes.” When properly conducted, you can financially benefit from providing a sponsorship. Before investing in this opportunity, you should consider some features of the relationship.

The Association

To receive the maximum benefits from a sponsorship, the company should establish a clear connection between themselves and a team or club. You want to ensure your donation is purposeful rather than a charitable gift. There are a couple of ways you can guarantee your sponsorship remains eligible for a tax deduction. If your company utilizes the relationship as an advertising opportunity, you can write it off as a business expense.

Display a Clear Message

If your company decides to sponsor a group, such as a co-ed college soccer club, you can provide the team with the necessary apparel. To gain a tax deduction for this transaction, you can display your company logo and advertising message on their jerseys. Whatever message you project on the apparel should be genuine to receive customer gains.

Ensure you document these messaging efforts to back these purchases as advertising expenses, maximizing your tax benefits. Also, ensure each player displays your message on their apparel to avoid the misconception that you are sponsoring an individual player. If you support one player rather than the entire team, you are ineligible for the write-off.

Inducement to Purchase

You can also use your sponsorship to increase the sales of your company’s goods and services. The Internal Revenue Service (IRS) identifies these efforts to increase sales as evidence of an advertising expense. Your company can entice an audience while sponsoring a club by utilizing a call to action.

For example, if you sponsor a university’s math club, you may display a banner at the local mathematical Olympiad asking the audience to visit your store today. When you advertise to potential customers in this manner, you can write off the cost of supplies as another advertising expense.

The Difference Between Advertising and Charitable Expenses

When providing a sponsorship, it is essential to identify the differences between an advertising and charitable expense to maximize your tax deduction. Above, we explored the aspects of an advertisement-driven sponsorship. Charitable donations differ from the examples above because they are not for marketing purposes.

A charitable expense lacks a relation to a sales inducement, and it may be an anonymous gift. This act of service may seem beneficial in hindsight, and it contains additional disadvantages. If you attend an event that you sponsored, and the ticket you purchase has a similar price to your donation, you are ineligible for a tax deduction.

You may also not receive the financial benefit if you sponsor a for-profit event. These limitations contribute to a sponsor’s decision to use their relationship for advertising purposes.

Tax Deduction Documentation

When companies sponsor college teams and clubs, they must fill out the necessary documents to receive their tax deduction. If you are claiming an advertising expense, you will need to complete the Schedule C, line 8 section of your business income form. If you’re not familiar or comfortable with doing this yourself, a tax professional can help you iron out the details of claiming a specific charitable deduction.

You should have all of the necessary information from your purchase history to fill out this portion of the document. One can list banners, apparel, and any other purchases that display your logo and message on the form. Make sure you take photos of your investments in use to back your write-off. You cannot deduct the cost of attending events, so you will want to leave these out when you file your taxes.

Steps to Sponsorships

Once you evaluate the financial benefits of higher education sponsorships, you may wonder what the next step towards establishing this relationship is. Your company should start by assessing local colleges with high-exposure clubs. If your state university has a successful club sport with large gameday crowds, this may be a beneficial connection for your business.

Certain clubs and organizations can also reflect your business’s ideals. Sports teams display a value of teamwork and a sense of drive that consumers can inherently sense about your company. It is also essential to choose a group to sponsor that relates to your industry.

You can use clubs and events to meet your customers where they reside. If your company specializes in environmental law, you may want to sponsor the environmental club or pre-law fraternity. Multinational companies may wish to sponsor a traveling club where local businesses can attract more customers by sponsoring events in their area.

When you identify which college club or organization you would like to sponsor, you can develop a marketing strategy and budget. Your marketing strategy should cater to individuals on campus and spectators who attend events. Then you can reach out to your chosen group and initiate your mutually beneficial connection.

Additional Benefits of Tax-Deductible College Sponsorships

If you are ready to get the ball rolling with your sponsorship opportunity, it is essential to understand the full benefits of this connection. As mentioned above, this relationship allows you to advance your advertising exposure. It also allows your audience to view your company as charitable and giving, offering a positive image of your brand.

Sponsorships help local businesses connect with the top talent on campus. Your company can link up with future employees and gain an understanding of their talents and skills before they graduate. Students may be more likely to apply to your company over your competitors if you sponsored their college organization.

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