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What is a Non-Profit Charity?

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  • Written By: Luke Arthur
  • Edited By: Heather Bailey
  • Last Modified Date: 02 December 2016
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A non-profit charity is an organization set up to further a charitable cause and does not have ownership. Non-profit charities are instead managed by a board of directors. Individuals can make donations to this type of organization and receive tax benefits by doing so. The extra money earned by this type of organization is retained to further the organization in the future.

There are many non-profit charity organizations that have been created to help a specific cause. For example, there are charitable organizations that help during medical emergencies and others that help provide clothing to the underprivileged. Each charity has a specific goal and is designed to help others.

Even though this type of organization is referred to as a non-profit charity, that does not necessarily mean the organization cannot make a profit. The key difference between a non-profit charity and a regular business is that the extra money is kept by the organization instead of distributed. With a regular business, the profit is distributed to shareholders or business owners. With a non-profit charity, all of the excess money, or surplus, is kept and used for the betterment of the charity.

Another unique feature of this type of organization is that it is managed by a board of directors. Regular businesses have owners and the individual who is in charge will make decisions for the company. With a non-profit charity, all of the important decisions are voted on by the board.

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Individuals can make contributions to this type of organization and receive some nice tax benefits. When an individual contributes something to the charity, he or she gets to deduct the amount of the gift on his or her taxes. According to IRS laws, up to 50% of an individual's annual income can be deducted with this type of donation. Individuals can also donate goods or services to a charity and receive a tax deduction as well.

Another potential tax benefit that can be received by giving to a charity is avoiding capital gains taxes. If an individual gives assets that have appreciated in value, he or she will be able to avoid paying the capital gains taxes on the change in value. At the same time, the individual will also be able to take advantage of the tax deduction on the value of the assets.

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