Donation Project for Non-Profits

[DalekZED]

Our company produces and edits video content for a variety of clients. We were approached by a local NPO to do some work for them and are wondering if it is possible to deduct the work and/or the cost of the project when filing our company's taxes.

I have read over IRS Pub 334 (https://www.irs.gov/pub/irs-pdf/p334.pdf) and Pub 526 (https://www.irs.gov/pub/irs-pdf/p526.pdf). In them it states that wages are not deductible, and that intellectual property IS based on 'fair market value'. A video is worth what we charge based on the time-cost put in; can we deduct what we would normally charge for the video?

I think the answer is "yes", want to ask the community for opinions though.

[Carl]

At best, charitable donations to a qualified charity are only 50% deductible. You're better off forgetting about that angle. Instead, take your normal business expense deductions which are 100% deductible as a business expense, and just "give" the finished product to the NPO. Overall, the transaction will show a loss since without them paying you for it, there will be no profit on this one specific transaction.

You could also just charge them your actual costs to produce the end product and break even with no loss or gain, but at a considerable savings to the NPO.

No matter what you do:

- you still have to pay your employees.

_ you still have to pay for the utilities consumed in producing the product (like electricity)

- you still have to pay for the materials used in the production of the product (such as the video tape)

Claim those costs as a donation, and it's 50% deductible.

Claim those costs as an actual valid business expense (which is exactly what they are), and they're 100% deductible.

[Anonymous · Accepted solution]

I disagree.  charity on a personal return is 100% deductible subject to a limit based on AGI which is 50 or 60 %.

however it's probably better to take as a business deduction because this will lower AGI on a personal return and if you don't itemize any "charitable" benefit would be lost.