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