An interesting situation has arisen in connection with at check out donation solicitations. Credit to Isaac Butler who retweeted a link to a post about a man who brought suit against drugstore chain CVS claiming the check out solicitations were a reimbursement for a $10 million donation obligation CVS had made to the American Diabetes Association. In November, CVS asked for the case to be dismissed based on their claim that their agreement was only to make up the difference between what customers donated and $10 million.
Emma van Inwegen who linked to both articles in a Twitter thread helpfully added a link to a third article by the Tax Policy Center that answers the question about who gets the tax benefit when you donate at checkout.
According to author Renu Zaretsky there are a lot of Tiktok videos out there that spread incorrect information about the transaction. She says her children have forbidden her to post a video on the site refuting the misinformation. (my emphasis)
To start, keep in mind that there are two ways charities can benefit from point-of-sale donations. The first is where the store donates a share of its sales. That type of donation is deductible by the business but not by its customers. The second way is where customers add something to their bill at the register with the extra amount going to charity. Customers can claim those amounts donated as deductions on their individual income tax return, though almost nobody ever does.
She goes on to explain that when you donate at check out, the business receiving the funds on behalf of a charity is only acting as the collection agent and does not get any tax benefit.
Zaretsky says the problem with giving at check out is that most people won’t get credit for that, or any other donation they make, because they don’t itemize deductions on their taxes.
Even with a receipt, more than nine out of 10 taxpayers won’t deduct this—or any other– charitable donation from their federal taxable income. That’s because they do not itemize their deductions.
When the Tax Cuts and Jobs Act effectively doubled the standard deduction, the number of households claiming itemized deductions fell from 46.2 million in 2017 to 16.7 million in 2018. Most of those still itemizing their deductions are higher-income households. Those making more than $3.3 million annually get more than one-third of the federal income tax benefits from charitable giving, and few of these households are likely to do much of their giving at the grocery checkout counter.