Wednesday, December 24, 2008

Donations: Cookies and websites are very different


I was viewing Q&A #7 on your website -- No deduction for donated work or services .

I have been developing a website for a non-profit free of charge. While I understand that I cannot claim the time as 'service donated'... The website itself, or the files, are tangible real world items, as a pair of shoes or a bicycle would be. So, as I created and donated the website in its entirety, would that qualify for a deduction of some type. Normally I would charge a client $1500.00 for the ownership of such files.

Thanks in advance!!

Dear CWS,

Tangible is something that can be touched. I can pick up my shoes. Hold up the bike for the child to ride. But, no matter how good you are at web development my bet is I could not walk into your office and lift up that website and put it into an attache' case. Right? So we got tangible out of the way.

The first sentence of the Q&A that you refer to is: "You cannot claim a tax deduction for time or services donated to a charitable organization." It's your time and skill that made that website. No bricks or screws or bolts or anything else that you paid for went into that site. If you had phone charges or extra electricity fees because of the volunteer services, you could claim those expenses as a charitable deduction.

If you were not a web developer but, let's say, a plumber with IT skills, and you bought Dreamweaver solely to make the site for the charitable organization, then you would be able to deduct the cost of Dreamweaver as a charitable contribution. That would not be a business expense.

In the same way, had you developed a great chocolate cookie recipe that you gave to the charitable organization so that volunteers could bake cookies to sell -- no deduction for you. On the other hand, were you to bake the cookies and donate them to the charitable organization your deduction would be the cost of the flour, sugar, chocolate, gas use for your oven, etc.

Here's more to read on the topic expenses -- donated services or products .


1 comment:

Ken said...

First of all, I just discovered this blog and I love it!!

I have a question/comment regarding this topic.

Are websites really different from cookies? I understand that time and services are not deductible. However, when a developer creates a website s/he is really developing a "product" with tangible lines of programming code and logic. If a website is developed and donated is not this "product," which has a value and could be sold to someone else, what is really being donated, versus the time spent to do it, and therefore deductible at its fair-market value?