162: No, Not the Tomatoes! | Are Nonprofit Startup Costs Tax-Deductible Donations for the Founder?

162: No, Not the Tomatoes! | Are Nonprofit Startup Costs Tax-Deductible Donations for the Founder?

Author: Jess Birken, MNM, JD April 16, 2026 Duration: 16:12

You scraped together your own money to start a brand-new nonprofit. You're out the money, but can you at least take a tax deduction?

Meghan and I are back with a question from a new nonprofit founder who wants to know if the startup cash they put in before getting their 501c3 status counts as a tax-deductible donation. It's one of the most common questions we hear from new founders, and the answer involves a pretty handy IRS rule most people don't know about.

Real Listener Question:

"In June 2025, two friends and I created a housing placement nonprofit and each put our own money in to get it started. We earned our 501c3 status that September. Does that startup cash count as a tax-deductible donation even though it happened before our status was official?"

Meghan and I break down the IRS backdating rule, the chicken-and-egg problem of nonprofit startup costs, and what founders need to know before they file their taxes.

What You'll Learn:

  • Why starting a nonprofit costs more than most founders expect
  • The IRS backdating rule and how it protects early donors and founders
  • What the 27-month window means for your tax-exempt status
  • How founders can get reimbursed for the startup costs
  • Why you can't take a deduction AND get reimbursed later

Bottom line: Nonprofits are businesses, and businesses have startup costs. Know your options before you file, and don't double dip.

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Ever find yourself wishing for a direct line to seasoned nonprofit leaders, a chance to unpack the real challenges that don’t make it into the glossy annual reports? Charity Therapy is that conversation. With host Jess Birken, who brings her background as a lawyer and a Master of Nonprofit Management to the table, each session feels like pulling up a chair with a trusted advisor. The discussions move beyond theory, tackling the granular details of operations that leaders actually face-whether it’s navigating a tricky IRS compliance question, rebuilding a fundraising strategy from the ground up, or managing the complex interpersonal dynamics that define any mission-driven team. This podcast digs into the operational heart of the sector, offering pragmatic insights you can apply directly to your own work. It’s a resource built on the understanding that running a nonprofit is a continuous practice of problem-solving, and Jess guides these explorations with clarity and a deep respect for the work. Tune in for honest dialogue that treats the daily grind of management as the serious and nuanced craft that it is.
Author: Language: English Episodes: 100

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