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accounting for donations

Posted: Thu May 15, 2003 8:16 am
by Marilyn Kaminski
I've just donated a few pieces for a charity auction and now I'm wondering how do I deal with them on my taxes? I do a Schedule C ... can I add a miscellaneous expense for "donations"? Advertising?

Thanks -- Marilyn

Posted: Thu May 15, 2003 8:51 am
by Marty
Unfortunately the IRS will only allow you to deduct your manufacturing costs, not the fair market value. I've been told that if it cost me $50 in materials and $50 in someone else's labor, that's all I can claim, not the extra $50 that I put into the piece. I'd assume that if I was an employee of my own corporation that my labor would be deductible as well.

Of course, you can claim what you want (until you're audited).
BTW see the NYTimes yesterday (14th) p.A22- "IRS Laments It's Too Poor To Pry Loose Billions Due".

Posted: Thu May 15, 2003 9:48 am
by Bert Weiss
I wonder if you can sell the piece to your spouse and have them donate it??

Posted: Thu May 15, 2003 11:32 am
by Brad Walker
Bert Weiss wrote:I wonder if you can sell the piece to your spouse and have them donate it??

If you claim the income from the sale, then I suppose your spouse could claim the donation. But what would that accomplish?

Regarding the value of the donation, Marty is right. In the US, the IRS only allows artists to donate the cost of materials, not the market value. A recent issue of Crafts Report had an article on a proposed law that might change this, but I don't think it's anywhere near passing.

Posted: Thu May 15, 2003 12:26 pm
by gone
There's a very informative thread on the Crafts Report Board on this subject. ... f=2;t=1207


Posted: Thu May 15, 2003 12:32 pm
by Dani
There is a bill that just cleared Senate and is expected to clear the House that allows artists to deduct fair market value on their donated works.... you just have to get a written appraisal to prove fmv. This was discussed recently on The Crafts Report board.... check there for more information. In the meantime, you have already deducted what you can when you took your materials cost deduction.... that's assuming you're on a cash basis, otherwise adjust through your inventory.

Posted: Thu May 15, 2003 2:09 pm
by Brad Walker
There are several issues with this bill. For starters, it's not as simple as it sounds. There are lots of restrictions, including:

work must be created in last 18 months
value must be supported by an written appraisal, filed with tax form
donation must be to certain non-profit entities, such as museums

It's not law yet (and I don't think it will be that useful to artists anyway), but at least it's a start.

Posted: Thu May 15, 2003 2:22 pm
by Dani
Well, I haven't read the bill, but it will be useful to me. I donate work monthly, most of it recent and almost all of my work is relatively high in labor which I'm now giving away. I think this is one of those situations where anything more than what I'm getting (materials at wholesale) is better! And it's about time. Everybody under the sun wants donated work from artists and the artist usually gets nada (oh, except the "feel good" of donating which wears a bit thin after the first dozen or so pieces.) I think this will also help organizations that rely on donated artworks for their auctions.... our last PBS auction really had to struggle to get donations from artists. So much so, that some of the artworks were, er, rather questionable. LOL.