Donated Services ... but I see a hidden problem

Hi June,

I stumbled upon your FAQ while searching whether services donated can be deducted. You explained it nicely.

Question: Is it legal if I donated $1000 cash to a 503c and then got paid for my services by the 503c?

I realize that I'd still be out a good percentage because I'm paying taxes on that income, but given the cause I'd be willing to put up with that. I'm a videographer/photographer who is often dealing with no budget situations (and one who does not depend on this income but would like to see some compensation)

Martin
Golden, Colorado


Hi Martin,

Before answering your question I want to bring to your attention something that may be a serious problem for you. You said that you are "one who does not depend on this income but would like to see some compensation." If you read my posts on hobby vs business you know that you must be in it to make money. If not, then you're engaged in a hobby, not a business. Were you to make a similar statement to the IRS you'd have to do some fancy footwork to prove that you are an independent professional engaged in a business.

I have never had difficulty with someone donating money to a nonprofit that also pays him for services or products. I've frequently seen indies working for an organization and then so impressed with the organization's intent that they donate money, services, products. Be sure to read the posts here expenses -- donated services or products .

There is more info on this topic in my book Self-employed Tax Solutions .

-- June