Wednesday, December 10, 2008

ASK THE TAX PRO - CHARITABLE CONTRIBUTIONS

Q. Just wondering -- if we buy candy, 50/50 raffles, etc. from co-workers/friends/family for the benefit of schools or scouts, are we allowed to deduct the expenses on our tax return? (Sometimes, each order amounts to $40 or so.) If yes, should we pay by check each time?
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A. When giving me a list of charitable contributions for the year many clients will include the cost of raffle tickets, including 50-50s, purchased for the benefit of a church or school. Regardless of who is selling them (i.e. church or charity) 50-50 raffle tickets, or any kind of raffle tickets, are not charitable contributions - they are gambling. To repeat - raffle tickets are not deductible as contributions.

If you are reporting taxable gambling winnings on Line 21 of your Form 1040 - from whatever source (i.e. casinos, racetrack, lottery, raffle, etc) - the cost of raffle tickets are deductible as a gambling expense (to the extent of the winnings reported) as a miscellaneous deduction (deductible in full – not subject to 2% of AGI exclusion) if (and only if) you itemize on Schedule A.

The only possible instance in which you could claim a charitable deduction for a raffle ticket is if you purchased a ticket and then donated the ticket itself back to the charity so they could sell it again. In such a situation you would not have any chance of winning the item(s) being raffled.

For the most part the purchase of candy, cookies, etc from a church or charity (most common example being Girl Scout Cookies) is not deductible as a charitable contribution. You are not making a contribution - you are buying something of value for a fair market price.
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The only exception would be if, for example, the normal market value of a box of cookies is $3.00 and the charity is selling them for $10.00. In this case $7.00 would possibly be deductible. But in most cases the cookies and candy are being sold for pretty much what you would pay in the store - so no tax deduction.

TTFN

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