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In-kind donations and tax deductions

Unfortunately, this tax deduction barely covers diapers

Unfortunately, this tax deduction barely covers diapers

Last year, I did some work for a local 501.3c organization who I believed was doing some great things here in Media, PA.

It was for the First Fair Trade Town in the USA, and it was for their web site development.

I had done a lot of work on the first version of the web site, met with a lot of their staff, and developed the basic content management system that they were going to use for this site. They had asked for an invoice for the fair market value of the services, and said that I could get a tax deduction for the donated value.

Unfortunately, this isn’t true. According to IRS Publication 526, services donated are not tax-deductible.

I can deduct expenses I incurred while providing those services, such as mileage, subscription fees, etc. but I can’t deduct what I would charge them for my time. And no, you can’t deduct the meals you had with their staff, or the drinks I bought their staff when we went out clubbing in the city. And when I say “clubbing in the city”, I mean pretending to dance in my living room with my kids. Thankfully, my kids think I’m a great dancer, at least for a few more years. (Actually, the last time I went clubbing was at a friends wedding playing 80’s mashups. Sa … weet.) But I digress.

In some ways, this makes sense as you can imagine setting up a shell company, donating a ton of services to 501.3c’s and ultimately paying no taxes because you happen to charge $2000 an hour for consulting (for non-profits… that is.)

If you donate property to a 501.3c, then it is tax-deductible. So, could I, say, donate the web site to the 501.3c and deduct the full value? Questionable, at best.

In the end, as my accountant pointed out:

… no can do. That was out of the goodness of your heart! No tax deduction for your time or services, only for actual hard costs … Sorry.

Which was what I had expected when I initially got involved anyway.

Sigh.

5 Comments

  1. Linda Banister wrote:

    I need to know what the allowable per day tax credit we can give as a 501C3 to those who have provided housing to our artists. I know that there is a standard fee that either Equity or Agma sets up as a standard in-kind tax statement we can give to our patrons who house artists for us. I have gotten this kind of statment that allowed me a credit or contribution credit on my taxes from an organization that has brought in visiting artists and housed them in private homes. Thank you for your attention to my question.

    Monday, December 13, 2010 at 8:41 pm | Permalink
  2. kent wrote:

    @Linda: Unfortunately, I don’t think you can deduct that kind of donation, however, I am not an Accountant. But given this:

    Charitible Contributions

    It indicates that you have to donate tangible goods in order to get a deduction. So, if, for example, the artists were fed while being housed, that may be deductible. I would really talk to your tax accountant, but the above guide gives a good idea of what is allowable.

    Seeing that boarding victims of Katrina for 6 months only allows a measly $500 deduction, I wouldn’t keep your hopes up for a large per-diem deduction.

    Tuesday, December 14, 2010 at 8:37 am | Permalink
  3. Lindsay Donnan wrote:

    I am always looking online for ideas that can assist me. Thank you!

    Monday, March 28, 2011 at 10:08 am | Permalink
  4. Brenda Gilpin wrote:

    I have donated 100 hours of artistic time to painting art for a benefit that is a non profit organization. The items painted were sold and I received no financial benefit. Can i get a tax write off for this donation?

    Sunday, June 3, 2012 at 12:24 pm | Permalink
  5. kent wrote:

    @Brenda: Your time, unfortunately, is not deductible as a donation. However, if you donated property (e.g. paintings) then this may fall under the property exclusion I noted above. IANAA (I Am Not An Accountant) but I would certainly ask one if this is the case.

    Sunday, June 3, 2012 at 12:33 pm | Permalink