Tax Question

[Weve Got Your Customers]

Sorry to disappoint anyone, but not taking any advice provided here as "professional tax advice"

Just checking to see if I'm missing anything and thought this may be helpful for others as I've spent some time researching...

Over the years we've donated time and expertise to various non-profits and not expected anything in return.

Last year, the donations exceeded $6K for one non-profit including a new site build, SEO to make sure Trust flowed through to new site, a handful of consulting hours, etc...

The non-profit has signed off that the value is correct (I am omitting on purpose the additional steps needed for $5K+ appraisal).

Accountant however, pointed out Tax Code https://www.irs.gov/pub/irs-pdf/p526.pdf Page 6 Item 4 that Time and Services are not deductible.

I've always told my accountant that "I want to pay Every Penny that is owed, and not a penny more."

Anyone know of instances where a website or another service provided is deductible? Or is it always just the hard costs associated with that particular site or services provided? (ex: purchasing a premium theme solely for that site or hosting solely for that site...)

 

[Tim Colling]

...
Anyone know of instances where a website or another service provided is deductible? Or is it always just the hard costs associated with that particular site or services provided? (ex: purchasing a premium theme solely for that site or hosting solely for that site...)

Sorry but you're not going to win on that one, at least not in the USA under the Internal Revenue Code. The way that our tax code looks at this is the following:

You weren't paid for that time, so you have no gross taxable revenue that you have to recognize for income tax purposes, for that time.

If you paid someone else to do that work for that charity, then it would be different. You would have been paying out of pocket for the benefit of the charity, just as if you had written the check to the charity directly.

Note that this is different than if you donate used personal property to a charity like Goodwill or someone. In that situation, you DO get to take a deduction for the fair market value of the used goods, even though you theoretically COULD have sold them to someone else for money.

There's only so much logic and consistency in our tax laws, and then no more.

No good deed goes unpunished.

(Note: while I still hold a valid, paid-up California CPA license, I haven't practiced nor performed tax work for 30 years, so I might be wrong. But I'm pretty sure that I'm not.)

 

[Weve Got Your Customers]

Thanks for the Reply Tim.

Something I thought of that is a least a little interesting to me

With Services not being paid, say there is a very talented artist who specializes in building custom conference room tables - he uses wood that he finds in nature (assuming he doesn't pay to obtain the wood - stay with me here - lol)

Said artist sells his tables typically for $10K...

If he decides to donate the table to a non-profit, then would this now fall under "personal property", need an Appraiser to determine value that is donated or is he only able to write off the gas required to retrieve the wood and nails and stain?

Agree that "there's only so much logic and consistency in our tax laws", but struggling with the fact that someone can donate a 10 yr old couch and write off more than a "Marketing Machine" that is 1K times more valuable to a non-profit...

I guess a blanket statement for "Services" was needed in Tax Laws so people did not take advantage of time and services donated...

Thanks again for your reply.

I think I will skip providing anything other the gas mileage too and from helping outline marketing strategies for them. And provide the Services Donated Total to the Non-Profit only - since they need for their Accounting purposes...

 

[Tim Colling]

...Agree that "there's only so much logic and consistency in our tax laws", but struggling with the fact that someone can donate a 10 yr old couch and write off more than a "Marketing Machine" that is 1K times more valuable to a non-profit...

I thought about this a bit more after I wrote my reply and I recalled that the "logic" for this is as follows: in your example, you purchased the couch with after-tax dollars, dollars that you had received as compensation in some form and upon which you had paid tax.

That's different than the situation where you never "paid tax" on the time that you donate to the charity.

The moral to the story is: the government always gets paid, one way or the other, either by:
1) having you pay tax on earned income, or
2) denying you the tax deduction for the time you donate

Remember the old joke: "Don't steal. The IRS hates competition."

 

[Weve Got Your Customers]

That would also explain the gas and nails in the other example - being that would have also been taxed.

Spoke to a couple colleagues and in case this helps anyone - they do write off the Premium Secure Hosting they provide on Dedicated Servers and can show where other existing clients are paying thousands per year for the same. They are more involved in the Security and Technical side than I am - so I'll stick with not writing my service donations off and hoping to one day stumble upon a vein of gold - (then again - I'd have to pay when I sell what was found) LOL - Your Moral holds true!