Tax Deductions for Benefits

Subject: Tax Deductions for Benefits
From: Barbara Shaw
Date: 23 Mar 01 - 08:55 PM

I'm going through the annual U.S. Federal Income Tax agony, and after hours and hours of work I still don't like the results.

We've done more than a dozen music benefits over the past year, and I'm wondering if any of that can be used on our itemized deductions. I've included the mileage driving to and from the charity event, but what about the performance itself? Can you use the amount you would have been paid at such a performance as the amount of a non-cash contribution?

Just looking for honest deductions and opinions. And sympathy. I'd call and ask the IRS, but after being transferred 4 times and waiting on hold for 45 minutes, I finally gave up.

Subject: RE: Tax Deductions for Benefits
From: Sorcha
Date: 24 Mar 01 - 12:02 AM

Barbara, my understanding is that you cannot deduct the value of your time, which is what you are actually getting paid (or not) for. I tried to do this for Scouting, and was told that only actual cash outlay may be deducted; mileage, vehicle depreciation, babysitters, etc.

That was several years ago, and the rules may have changed. (Don't they always?) I am NOT an accountant, so don't take my word for it. Have you tried asking your local H&R Block rep? Could be faster than the IRS on the phone.

Subject: RE: Tax Deductions for Benefits
From: katlaughing
Date: 24 Mar 01 - 01:56 AM

Barbara, you may be able to find out by searching the IRS site. Here is a link to their INDEX which has a search function. Lots of stuff on there about charities.:-)

You might also call your local college or university. They often have trained volunteers who can answer your questions for free. Also, you could just go down to your local IRS office and ask them.

I suspect Sorcha is right, but as she said, I am not a pro, so don't take my word for it, either.{*-*}

Good luck,

kat

Subject: RE: Tax Deductions for Benefits
From: DonMeixner
Date: 24 Mar 01 - 03:07 AM

Hi Barbara,

Here is what I understand to be so with benefits. As far as the IRS is concerned your time is of no value. You may deduct real expenses such as miles, cost of having your clothes cleaned, lodging and food but not the performance it self.

If I donate a bracelet to a worthy cause to be raffled off to the highest bidder, the most the IRS will allow me to deduct is one half the value of the material I use at cost. So if a a bracelet has $10.00 worth of sterling the most I can claim is $5.00. So in theory if I sell a bracelet for $30.00 and I use the thirds principle of mark up, and I have $10.00 of silver in it, my $30.00 value has a taxable worth of only $5.00. I donate around thirty bracelets a year to causes making my real loss of income at about $900.00 but my taxable benefit is at $150.00. Whos' the fool now?

In the future donate your time as freely as you can. I do it still but if I did it for the moeny I'd be nuts. (I do it because I feel I owe some of what I got to help those who got not.) But when you do, ask for a thank you letter thanking you for your gift of a dollar figure. That will help you with your deduction. Or just suck it up and be altruistic about it.

Don

Subject: RE: Tax Deductions for Benefits
From: Barbara Shaw
Date: 24 Mar 01 - 08:59 AM

Thanks, Sorcha, Kat and Don. Some good ideas.

One I can use immediately is to ask the people running the benefit we're doing in April (and from now on) to give us a thank-you letter for the amount we're donating. The rest of the band is getting money, but we told them to donate our share to a Habitat for Humanity fund, so that should be totally reasonable. How come I never thought of that?!

Subject: RE: Tax Deductions for Benefits
From: GUEST,Roll&Go-C
Date: 24 Mar 01 - 09:37 AM

The advice above seems right on the money, and in line with what happens to other artists who donate paintings to benefit auctions; regardless of what the painting sells for the artist can only deduct the cost of basic supplies. On the other hand if you buy that painting and donate it to another benefit auction you can deduct the full value of what it sold for then, as long as you have a letter from the benefit committee verifying the sale. Bizarre!

Subject: RE: Tax Deductions for Benefits
From: Sorcha
Date: 24 Mar 01 - 11:32 AM

If you are going to deduct anything, GET RECIEPTS!!

Subject: RE: Tax Deductions for Benefits
From: DonMeixner
Date: 25 Mar 01 - 08:31 PM

Please refresh this

Subject: RE: Tax Deductions for Benefits
From: Barbara Shaw
Date: 29 Mar 01 - 02:02 PM

Well, I tried Don's suggestion about getting a letter from the sponsors of benefit performances. One was for a church, and they readily agreed to write the letter with a dollar amount for our donated performance.

Another was for a Rotary event. I asked a friend of mine to look into it, he forwarded it to the president of the organization - who happens to be an accountant - and this is the reply we got from the accountant:

As I'm sure you can appreciate, musicians giving out tax tips is as dangerous as me giving music lessons! Unfortunately, the advice given Barbara Shaw is misguided. There is no tax deduction for donating your time, services, etc. If there was, what kind of refund do you think us Rotarians would get????? The only deductions allowed are for cash donations, or non cash items such as clothes, art, stocks, cars, etc. to registered charities.

I took great offense at his implication that musicians are incapable of anything but music. My response to the friend was that this guy was patronizing and condescending, and that he had misunderstood my request.

We had in fact donated our fee. If we had been paid and then handed it back to the sponsor, it would be clear. A letter to that effect would have made it deductible.

I resisted the impulse to tell him that "us Rotarians" was obviously not written by an English major, so asking for a written response from an accountant was as dangerous as getting tax advice from a musician.

Subject: RE: Tax Deductions for Benefits
From: JedMarum
Date: 29 Mar 01 - 02:51 PM

I am not sure about tax dedcutiosn for charitable events, I have not tried to claim any, but since I am bound to pay income tax on money I earned I took deductions on money I spent earning it; guitar strings, picks, capos, microphones, PA equip, instruments and intrument repairs, CD and music pulications, periodical subscritions, mileage, travel expenses, meals when traveling, telephone and internets services, professional services (accountant, adverts, consulting fees). Everything I could prove that I spent on earning a music income. It was well worth the effort - I still have to pay the bast*rds much more then they deserve (even though they overcharged us to the tune of trillions), but I saved a lot of tax burden and was able to actually invest that money in my own music business.

Subject: RE: Tax Deductions for Benefits
From: Joe Offer
Date: 29 Mar 01 - 03:08 PM

Hi, Barbara - If you had collected a fee for your performance, that would be income and you would have to declare it as such. If you then donated that fee to somebody, you could then deduct it.
In your case, you had no income from the performance, so there's nothing to deduct. If you donated material goods, you would have paid for those goods with money you had received as income - and then you would have been able to take a deduction.
But if there's no income involved, there's no tax, so there's no deduction. You can deduct only the costs incurred. You can't deduct your time, because the government didn't tax you for your time in the first place.
See? Your U.S. Government does have some logic, at times....
-Joe Offer, retired bureaucrat-