Tax Deductible Services as Charitable Donation

By on February 10, 2010 in Articles

When it comes to any charitable deduction (e.g. Rooftop Auction), it has to be the amount spent and NOT the valuation of what they should have received.

Using Misha as an example, he donates his services at a value of $500.00. The auction winner ends up securing $800.00 of his total services and as such pays Misha $300.00. Misha books $300.00 towards his annual Revenue and books ZERO on his Schedule A, Itemized Deductions for Charitable Donations.

In order for Misha to wind up with a $500.00 charitable donation, he’d first have to receive $800.00 in this example and then make a donation of $500.00 (cash, check or credit card) to the school. By this, now he books $800.00 towards his annual business Revenue and has a $500.00 Schedule A Deduction.

Bottom line is that Services donated can NOT be valued at what you’d normally get. In these instances, only out of pocket expenses wind up as Charitable Donations.

Avatar of Wayne Allen Cameron

About Wayne Allen Cameron

My background in Taxation spans 32 years of service primarily concentrating on the Self Employed person. Since I am one of these, then I readily share the tax & business knowledge to each and every client I have. I am a member of the California Society of CPAs and subscribe to numberous tax resources to keep up to date with the ever present changes in Tax Law. I will also represent clients in IRS Audits or other troubles that occur.
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2 Responses to Tax Deductible Services as Charitable Donation

  1. JC Avakian February 10, 2010 at 4:00 pm #

    Wayne your are the man-great example, thanks for the clarification

    Reply
  2. Avatar of Bradley Charbonneau
    Bradley Charbonneau February 10, 2010 at 8:55 pm #

    Thanks for clarifying, Wayne! The detailed example above about Mischa is a big help.

    Reply

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