2026 tax year · Form 990-T
Nonprofit (501(c)(3)) tax calculator
A charity pays no tax on its mission. It does pay tax on a side business unrelated to that mission, at the flat corporate rate. This shows which of your dollars are which.
Tax exemption is not blanket. Donations, grants, program fees, and the investment income statute excludes are all tax-free. But if a 501(c)(3) runs a regular trade or business that is not substantially related to its exempt purpose, a museum operating a public parking garage, a charity selling advertising, that is unrelated business income (UBI), taxed at the 21.0% corporate rate on Form 990-T.
Donations, grants, program fees, investment income.
A regular trade or business unrelated to your mission.
Expenses directly connected to the UBI.
Enter your revenue mix to see what, if anything, is taxed.
What counts, and what does not
Exempt (no tax): donations, grants, membership dues and program fees tied to the mission, sales of mission-related materials, and investment income, dividends, interest, most rents and royalties are excluded from UBI by statute. Unrelated (taxable): advertising revenue, commercial sponsorships with real benefits, and merchandise or services sold as a regular business unrelated to the mission. Activities run mostly by volunteers, or for the convenience of members, are exempt even when they look commercial.
Worked example
A charity with $500,000 of total revenue, 85% mission-related, and $15,000 of UBI against $5,000 of related expenses:
| Line | Amount |
|---|---|
| Mission income (tax-exempt) | $425,000 |
| Unrelated business income | $15,000 |
| Less UBI deductions | −$5,000 |
| Less $1,000 specific deduction | −$1,000 |
| Net taxable UBI | $9,000 |
| Federal UBIT (21%) | $1,890 |
| Total tax on UBI | $1,926 |
The $425,000 of mission revenue is tax-free. Only the $9,000 of net unrelated income is taxed, $1,890 federally. On $500,000 of total revenue that is an effective rate near 0.4%.
Questions
Does UBI threaten our tax-exempt status?
A modest amount does not, you simply pay tax on it via Form 990-T. The risk is scale: if the unrelated business becomes a substantial part of what the organization does, the IRS can question whether the organization is still primarily operated for its exempt purpose. Keep UBI clearly secondary.
Is investment income taxed?
Generally no. Dividends, interest, most rents, royalties, and capital gains are specifically excluded from UBI by statute for a 501(c)(3). The main exception is income from debt-financed property, an investment bought with borrowed money can pull a proportional share back into UBI.
What is the $1,000 specific deduction?
Every exempt organization gets to subtract a flat $1,000 from net unrelated business income before the corporate rate applies. It means an organization with under $1,000 of net UBI owes no tax and, below the gross filing threshold, may not even need to file Form 990-T.
When is Form 990-T due?
A 501(c)(3) with $1,000 or more of gross unrelated business income must file Form 990-T, generally by the 15th day of the 5th month after the year ends (May 15 for a calendar-year organization), and pay any tax then. This is separate from the annual Form 990 information return.
Related tools
- Entity tax calculator how other structures are taxed
- C-corp tax calculator the same 21% corporate rate
- S-corp tax calculator for a for-profit venture
Estimate for the 2026 tax year. Whether a given activity is "unrelated" is a facts-and-circumstances judgment, see IRS Publication 598 and consult a nonprofit tax advisor. Not tax or legal advice.