Donate and deduct: how the 7% cap works for companies and individuals (and the mistakes that void the benefit)

Yes: donating to charity is deductible, for your company and for you — it's neither myth nor gray area, it's the express design of the law to encourage philanthropy. There is no shortage, though, of mechanical mistakes that turn generous donations into rejected deductions. Here is exactly how it works, with the caps where they belong.

The two 7% caps (which are not the same)

Legal entities (art. 27, sec. I of the LISR, the income tax law): they deduct donations up to 7% of the taxable profit of the immediately preceding tax year. Profit of MXN $10M last year → up to $700,000 deductible this year. With no prior-year profit, there's no cap available — a detail that surprises new companies or those coming off losses.

Individuals (art. 151, last paragraph): up to 7% of the prior year's accruable income — on income, not profit, a base that is usually more generous. The technical nuance the summaries leave out: since the 2022 reform, donations count within the global cap on personal deductions (five annual UMA — the official daily reference unit — or 15% of your income, whichever is lower), sharing that space with medical bills, tuition and mortgage interest. For a significant donor with many personal deductions, the global cap can bite before the 7% does — you plan the mix, not each piece in isolation.

The requirements that void real donations

• Authorized donee, verified today: only donations to organizations on the current registry that the SAT publishes are deductible (Annex 14 of the RMF — the annual tax regulations — and its public search tool). Authorizations do get lost and revoked — the worthy association without a current authorization yields zero deduction, however noble the cause.
• Donation CFDI, not a simple receipt: the supporting document must be a CFDI with the donee complement — the thank-you letter deducts nothing.
• In-kind donations, with their own rules: donated goods and real estate have their own valuation and mechanics (cost, not market value, as the rule for inventory) — donating in kind "at market value" to inflate the deduction is the well-known and actively pursued abuse.
• Not onerous or remunerative: the "donation" that buys a benefit (disguised advertising, consideration in return) is not a donation — and gets recharacterized.