Can I claim my donation as an expense?

No donations are not business expenses for sole traders. However, you may be eligible to claim a personal donation tax credit through IRD, which can reduce your overall tax bill.

This article explains the difference, what you can claim, and how to do it through Lodg.

1. Are donations a business expense?

No. As a sole trader filing as an individual, donations cannot be claimed as a business expense — they cannot be deducted from your business income in your IR3.

This is different from a company, where charitable donations may be treated differently.

2. What you CAN claim — the donation tax credit

Even though a donation isn't a business expense, you may be able to claim a donation tax credit as an individual. This directly reduces the amount of income tax you pay.

To be eligible, the donation must:

• Be $5 or more
• Be made to an approved donee organisation — this includes registered charities, certain schools, and other IRD-approved organisations. You can search the Charities Register at charities.govt.nz to check if an organisation qualifies.
• Be a gift with no personal benefit received in return — you can't claim for raffle tickets, event tickets, or payments where you receive something back
• Be supported by a valid donation receipt from the organisation

3. How the donation tax credit works

IRD allows you to claim back one-third (1/3) of your eligible donation amount as a tax credit.

Example:

You donated $300 to a registered charity during the tax year. Tax credit: $300 ÷ 3 = $100 off your tax bill

Key points:

• You can claim donations made in the current tax year or backdate claims for up to 4 tax years
• The credit is applied against your income tax — it reduces what you owe, or increases any refund
• You must have had taxable income in the year the donation was made

4. What you cannot claim

• Donations to unregistered or non-approved organisations
• Payments where you received goods or services in return (sponsorships, event tickets, etc.)
• Donations made by your business on behalf of others
• Donations without a receipt

5. How to claim your donation through Lodg

Lodg makes it easy to record your donations so they're included when your return is filed:

1. Log in to your Lodg account
2. Go to Expenses
3. Click Add Expense
4. In the dropdown, select Donation as the expense type
5. Enter the amount, date, and organisation name
6. Upload your donation receipt
7. Click Submit

Lodg will record the donation and include your tax credit claim when filing your IR3 — you don't need to do anything else.

Source: ird.govt.nz — Donation tax credits | charities.govt.nz — Charities Register