Think your 501(c)(3) status means zero tax obligations? Think again!
While your nonprofit enjoys many benefits,engaging in certain revenue-generating activities may subject you to Unrelated Business Income Tax (UBIT). Here’s what you need to know.
Understanding UBIT: UBIT applies to income from activities unrelated to your nonprofit's mission. Examples include:
Why It Matters: The IRS scrutinizes not only how you spend your funds but also their sources. Accepting certain types of income can lead to tax liabilities and added administrative tasks.
Tips to Minimize UBIT:
Key IRS Changes: Since 2018, UBI activities must be reported separately, preventing losses from one activity from offsetting profits from another. This emphasizes the need for careful planning and accurate tracking.
Action Steps:
Conclusion:Proper management of UBIT is essential for your nonprofit's financial health and compliance. By being strategic, you can minimize tax burdens and stay focused on your mission.
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