Tuesday, June 7, 2011


As a follow up to yesterday’s post on deducting volunteer expenses – let’s look at something else you can deduct as a charitable contribution on Schedule A.

Have you ever been asked to bake a cake or cookies for a church bazaar, or a fund-raiser for a local charity? You can deduct the cost of the ingredients of the cake or cookies - such as cookie dough, eggs, flour, milk, etc. - as a charitable contribution!

Similarly, if you knit specialty items for sale at your church Christmas Fair you can deduct the cost of the materials.

There is another application of this concept that has become a bit controversial. It concerns an artist donating his/her work for sale at a charity fund-raiser.

If an artist donates one of his/her own pieces to a charity, the tax deduction allowed is limited to the “out-of-pocket” cost of the materials used to create the artwork, such as paint, canvas, framing, clay, etc. Many artists feel that they should be allowed to deduct the fair market value of the artwork.

A deduction is allowed for the “fair market value” of tangible personal property (other than stock or other investments) donated to a charity only if the item donated is used for the exempt purpose of the charity, such as artwork donated to a museum which is displayed as part of the museum’s “permanent collection”. However this deduction is limited as described above if the person making the donation is the artist that has created the work.

What makes the “market value” of a piece of artwork greater than the actual cost of the materials is the “time and talent” of the artist. If I, as an accountant, volunteer to keep the books of a charity I cannot deduct the value of my “time and talent” as an accountant – I can only deduct any “out of pocket” expenses that I incur in the course of donating my time and talent. It is no different with an artist.

FYI, I discuss in detail Deducting Contributions in the 2011 edition of my report “Itemized Deductions: A Complete Guide to Schedule A”.


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