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What are the advantages of obtaining tax-exempt status?

On Behalf of | Jan 26, 2024 | Non-Profit Organizations

As a non-profit organization, you need to make your money go as far as possible. Fortunately, the IRS recognizes this, which is why the government allows non-profit organizations to acquire tax-exempt status. The government isn’t going to bestow this status upon your organization automatically, though, so you’ll have to be proactive in seeking it out.

But is the effort really worth it? Let’s look at the advantages of obtaining tax-exempt status.

Why should your organization seek tax-exempt status?

There are several benefits to becoming a tax-exempt organization. While you’ll certainly avoid paying federal income tax, there are other advantages, too. This includes:

  • Donors can deduct contributions that they make to your organization.
  • Your organization will gain the ability to apply for grants that are restricted to tax-exempt organizations.
  • Your tax-exempt status will lend you a certain amount of credibility.
  • You’ll receive discounts for certain postal services.
  • You’ll likely receive reduced postal rates.
  • You’ll avoid some state taxes.

These benefits can go a long way for your organization, giving you the additional financial support you need to be successful.

Are there disadvantages to becoming tax-exempt?

There are some minor ones. For example, once you become a tax-exempt organization, it no longer belongs to those who created it. Additionally, your organization’s financial information will become accessible to the public. For many, though, these drawbacks are far outweighed by the advantages of tax-exempt status and the progress they can provide in furthering your organization’s mission.

Do you have questions about obtaining tax-exempt status?

If so, then don’t hesitate to turn to resources that might provide you guidance. After all, this is a decision that you should make once you’re fully informed of the process and what it can and can’t do for your organization. Hopefully then you’ll choose the path that best furthers your cause.