Can I take a business deduction for the small cash donations my business makes to various qualified charities in the neighborhood? I am a sole proprietor.

If you itemize your deductions, you can include these gifts with your other charitable contributions on Schedule A, as long as you have a receipt for each payment. You may not generally take a deduction for these gifts on your Schedule C. However, if you made a payment to a charitable organization that was not for charity nor a gift, you may deduct the payment as an expense to the business. You may want to clarify or consider the terms of your donation. If your business received any benefit for the donation (ad space or marketing, for example) you may deduct the payment as an expense. Otherwise, your charitable gift/donation is not deductible under your business, but may be deducted on Schedule A if you itemize your deductions for your personal tax return.

You may want to review the IRS link below for clarification on this rule. There are examples that may help you determine if you can deduct the payments or not: http://www.irs.gov/publications/p535/ch11.html.