When should I deduct art material expenses for project started in one year but delivered in the following year?

[BillMc]

I make fine art quilts and donate them to charitable organizations (e.g. the ALS Foundation) who, in turn, give the quilts to the patients they serve.  In the past week, I have purchased materials for a quilt that I just started.  It will not be donated until early 2025.  When do I take the materials deduction?  The materials receipt says 2024 but the donation will be in 2025.

[xmasbaby0 · Accepted solution]

Enter the donation for the year in which you actually make the donation.   You can use the amount you paid for the fabric and supplies, but you cannot enter anything for your time or expertise in making the quilts.  

That being said,   if you do not have enough deductions to itemize, then your donations will not affect your refund or tax due.  You will just receive the standard deduction.

A charitable donation almost never changes your tax due or refund all by itself.  First, your donation does not count "dollar for dollar"--it is calculated by a percentage based on your tax bracket.  You need a LOT of other itemized deductions like mortgage interest or property taxes, medical expense, etc. to itemize and exceed your standard deduction.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the current tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income. The standard deduction makes some of your income “tax free.”  It is not a refund.  You will see your standard or itemized deduction amount on line 12 of your 2024 Form 1040.

2024 STANDARD DEDUCTION AMOUNTS

SINGLE $14,600    (65 or older/legally blind + $1950)

MARRIED FILING SEPARATELY $14,600    (65 or older/legally blind + $1550)

MARRIED FILING JOINTLY $29,200    (65 or older/legally blind + $1550)

HEAD OF HOUSEHOLD $21,900    (65 or older/legally blind + $1950)