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How do donations of goods or services affect taxes?

For example, I am donating a free month of art leasing service to the silent auction at the annual events for local business administration groups.  Can I deduct the market value of these donations from my taxes? 

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4 answers

Hi Peter,

You'll want to check with your accountant, to see if there are more specifics for your state, but basically, the IRS says yes - as long as you're not getting anything of value in return.  For example, if you're getting a T-shirt with a SRV (Suggested Retail Value) of $12.00, you have to deduct the $12.00 from the total amount of your deduction.

In some instances, to get a full deduction, your donation has to go to a registered charity - either a 501(c)(3) or 501(c)(4) and you still have to deduct anything of value.

According to the IRS, Publication 78, "You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions." However, for many businesses, the standard deduction actually gives you as much as, if not more than the amount you're deducting - so again, you'll want to talk to your accountant.

In addition to itemizing your deductions, you'll need a letter on letterhead, with the details of the donation (a simple thank-you letter from the organization is usually sufficient.)  You'll also need to have your own records showing the deduction, the amount, the date and the name of the organization.

Also, probably the fastest way to find out is to check with them to see if your donation is tax deductible - they should be able to tell you.

Hope that helps.

Warmly,

Cheryl Antier

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Peter:

 

I am not sure what exactly, “art leasing service” is, but the word in the phrase “service” is enough to tell me that you are donating some sort of service as it pertains to art, which is a non-issue as it relates to taxes.

 

Section 170 of the IRC, states that an individual may take a deduction for donating a service, but the organization that you are donating to has to be a qualified organization and the time that you would normally charge for such service is NOT deductible only the out-of-pocket expenses that preceded the service can be deductible.

 

Qualified organizations include, trust, fund, foundation, churches, fraternal societies, educational institutions, hospitals, medical schools, government supported organizations, government unit, etc.

 

Hope this helps!

 

Best regards,

 

Walter Victor

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Thanks for your answers, both.  

Walter: so just to clarify, let's pretend I'm a massage therapist.  If I donate a gift certificate for a 1 hour massage to a qualified organization, does that mean that I'm only allowed to deduct the cost of massage oil, laundry etc. (ie basically nothing) and not the value of the 1 hour massage? 

Thanks!

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