how do you make money if it’s a non-profit organization?
In: Other
There’s quite a bit of “good enough” discussion of not-for-profit versus for-profit.
More relevant in the US is “501(c)(3) not-for-profit organization”. That’s the section of the internal revenue code that allows you to deduct your contributions to the organization from income.
If I see that you’re homeless and hungry, and buy you a meal and pay for a motel room, that’s nice and all, but it isn’t tax deductible. (Not all charitable expenses are deductible.) But if I contribute an equivalent amount of money to “Room at the Inn”, I can deduct it. (Because they’re a 501(c)(3) charitable institution.) They don’t pay income tax on that donation, so they can provide food and shelter for substantially less that “fair market cost”.
They will get in trouble if they don’t spend enough on their mission. Then they’ll lose their tax-exempt status and get hit for back taxes.
It doesn’t just apply to charitable organizations. The other big ones are religious and educational organizations.
This is specifically US-oriented. Things work differently in other countries. I know that “not-for-profit” (untaxed) entities exist, but I don’t know the mechanics. Some of them even have IRC 501(c)(3) status even though they would not be taxed in the US, so that their US contributors can deduct their donations. (All right, at least one, that counts as “some”.)
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