Your time is valuable, but the IRS doesn’t care.

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I’ve always said that if you want to really get to know someone, do their taxes. Most people don’t view it as that big of a deal, but others view it as a very personal experience. After I’ve worked with someone I know who they are, where they live, where they work. I’ll know if they have kids, are in school, are they saving for retirement, and may other factors that tell me what their life is like and what kind of person they are. One other thing that comes up commonly is, do they donate to any charities.

Donating to a good cause is a great thing that lots of people do every year. Many people are able to take advantage of the tax benefits of donations, but not everyone can.  In an earlier posts I talked about some common misconceptions about the tax benefits of donations.  Just because you donate something doesn’t automatically mean that you get a tax break for it.  To be honest, if you’re making a donation just for the tax deduction, you’re doing it for the wrong reason.

I work with a lot of new business owners.  One common thing that gets brought up is donating a free consultation, evaluation, portrait session, etc.  Some people just legitimately want to help the organization out by donating this service, others want to help out but also view it as a form of advertising.  Either one is a perfectly fine reason for making a donation.  The problem comes when they think they can deduct the full market value of the donated service.  When it comes to donating your time, your hourly “billing” rate is $0.  While you’ve done a wonderful thing, your time has 0 in the way of deductible value.  That’s not to say that you can’t take any deduction for your donated service.  You can deduct your actual costs.  So any supplies that you needed to purchase for this, as well as your mileage, are all deductible, but that’s it…Sorry.

For artists, the majority of the time, it’s going to be exactly the same as I described above.  However, there are some rules regarding the donation of intellectual property and finished works of art that may apply.  Though that’s too involved of a discussion for a format like this.