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jobejobie
Level 2

BOGO AND TAXES

I do a Christmas Buy Two Get One Free sale. Is there a write off on all the free service?

2 Best answer

Accepted Solutions
BarbL
Employee Tax Expert

BOGO AND TAXES

As Critter stated, there is no write-off for services given for free.  However, any expenses related to those services would be deductible.  For example, if you are a photographer giving away a free on-location portrait session and one print from the session, your mileage to the location and your cost of the print would still be deductible even though the time and your services would not.

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BarbL
Employee Tax Expert

BOGO AND TAXES

If there are costs associated with the massage services, those will be deductible as business expenses.  The value of the certificate is not deductible.  

 

As an example, let's assume your sessions are each $100, and you use $10 in oils for each session. 

 

For each of  the first two visits, you will claim the $100 as income, and deduct the $10 as a business expense.

 

For the free session you will have $0 income and claim the $10 deduction for oils.

 

The $100 value of the session is not included anywhere - it is not income or a deduction.  

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13 Replies
Critter-3
Level 15

BOGO AND TAXES

There is no "write off"  for services given away ... you will simply have less income to report.  

BarbL
Employee Tax Expert

BOGO AND TAXES

As Critter stated, there is no write-off for services given for free.  However, any expenses related to those services would be deductible.  For example, if you are a photographer giving away a free on-location portrait session and one print from the session, your mileage to the location and your cost of the print would still be deductible even though the time and your services would not.

View solution in original post

jobejobie
Level 2

BOGO AND TAXES

I am an LMT and I am giving free Massage Therapy sessions at my location. So I can use the cost of each package the client gets for free? (it is a physical certificate the are purchasing and getting for free after buying two certificates BTGO

DonnaD2020
Level 2

BOGO AND TAXES

If there is a product that is being given for free, the cost of the product would be an expense.  If they are getting services from you, you cannot deduct the value of your time.

Critter-3
Level 15

BOGO AND TAXES

What cost ?   If you are doing the service for free you just have less income to report ... you cannot take a deduction for your labors or money you did not get.  

Critter-3
Level 15

BOGO AND TAXES

IFFFFFF .... in your bookkeeping system you actually enter in the service given as income and then negate the fee paid by the coupon being used   THEN and ONLY THEN   will you  enter the income and the negating deduction on the Sch C   if for no other reason than to match your bookkeeping  system  HOWEVER it is better to make the change in your bookkeeping system instead.  

BarbL
Employee Tax Expert

BOGO AND TAXES

If there are costs associated with the massage services, those will be deductible as business expenses.  The value of the certificate is not deductible.  

 

As an example, let's assume your sessions are each $100, and you use $10 in oils for each session. 

 

For each of  the first two visits, you will claim the $100 as income, and deduct the $10 as a business expense.

 

For the free session you will have $0 income and claim the $10 deduction for oils.

 

The $100 value of the session is not included anywhere - it is not income or a deduction.  

View solution in original post

jobejobie
Level 2

BOGO AND TAXES

Got it! thank you so much for the explanation, BarbL!

jobejobie
Level 2

BOGO AND TAXES

it seems like it would fit into some kind of donation, or gift. I understand now that its all about income and deduction. sorry some of us aren't versed in this stuff, thats why we're all here. 

BarbL
Employee Tax Expert

BOGO AND TAXES

My pleasure.  That's why we are here!

jobejobie
Level 2

BOGO AND TAXES

so gift or donation is not a category for this? just making sure 

Critter-3
Level 15

BOGO AND TAXES

This is not a gift or donation ... your services you give away cannot be deducted as either on a business return. 

jobejobie
Level 2

BOGO AND TAXES

great! thanks for the clarification on this. I've done this sale for years and have never clarified. Mahalo nui

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