Your time and taxes

[alabama1980]

Tis the season for such questions...

While reading another post about doing "free" work a question came to mind that I hoped some of you brains around here could answer.

If a photographer donates their talents and resources, are those claimable as deductions on taxes?

Like if donate a shoot for churches, relay for life, march of dimes etc can you deduct what the job would normally run?

[Tigershark]

Nope just the mileage and that is even a a reduced rate. Labor is not deductible. If you had prints made then the costs of the prints would be deductible but that's about it. Sorry

[asysin2leads]

Nope just the mileage and that is even a a reduced rate. Labor is not deductible. If you had prints made then the costs of the prints would be deductible but that's about it. Sorry

I believe mileage for non-profit is 14.5 cents/mile.

[T2000]

http://www.irs.gov/publications/p526/ar02.html#en_US_publink100049652

[sfaust]

I believe mileage for non-profit is 14.5 cents/mile.

While the IRS lists 14 cents per mile, you can deduct the actual costs which are surely to be more.

[alabama1980]

Good info! Thanks guys!

[BscPhoto]

I asked my accountant that same question last year. I thought that my hourly rate was enough to go off of. I think it's bull crap

[sapearl]

Hopefully he advised you against deducting your hourly rate. Claiming it would certainly raise a flag of interest, although I agree with your sentiments.

I shoot for several non profit and charitable organizations in the area but only deduct the cost of my materials, and mileage, per my CPA's instructions. I donate framed work to the local PBS station's annual fund raising auction, but again I can only deduct the cost of the materials that went into each, and not the price I assigned to each.

I asked my accountant that same question last year. I thought that my hourly rate was enough to go off of. I think it's bull crap

[sfaust]

One way to get the full deduction which includes your time, is to bill the client your normal rates. Once you receive the payment from them, donate it right back to them. They have the benefit of being able to claim your fees as expenses, and the photographer has the benefit writing off the full donation. It's far better for both parties over donating free time IMO.

[egordon99]

Except you'd have to add the payment in as income to you, so it would be a wash in the end.

Otherwise, what would stop you from asking for $30,000 payment and reaping a $3000 tax "credit" (assuming your effective tax rate is 10%) ?

One way to get the full deduction which includes your time, is to bill the client your normal rates. Once you receive the payment from them, donate it right back to them. They have the benefit of being able to claim your fees as expenses, and the photographer has the benefit writing off the full donation. It's far better for both parties over donating free time IMO.

[sapearl]

I like the sound of that Stephen........ but are you sure this is legal? If that were the case everybody would be doing it ;).

One way to get the full deduction which includes your time, is to bill the client your normal rates. Once you receive the payment from them, donate it right back to them. They have the benefit of being able to claim your fees as expenses, and the photographer has the benefit writing off the full donation. It's far better for both parties over donating free time IMO.

[egordon99]

See my post above, it's "legal" if you claim the payment as income (and pay taxes on it)

[stathunter]

I like the sound of that Stephen........ but are you sure this is legal? If that were the case everybody would be doing it ;).

legal.........who's asking?

[sapearl]

...hehehehehehe.....:lol:

legal.........who's asking?

[egordon99]

Doesn't matter who is asking, it's illegal, UNLESS you also add the payment in to your income for the year (which nets you ZERO in the end)

People always suggest this as a way to get around the IRS's rules on deducting time, and I always hope someone points out that it's wrong. But hey, if you want to get audited ;)

[estisdal]

Doesn't matter who is asking, it's illegal, UNLESS you also add the payment in to your income for the year (which nets you ZERO in the end)

People always suggest this as a way to get around the IRS's rules on deducting time, and I always hope someone points out that it's wrong. But hey, if you want to get audited ;)

As I'm seeing it, you actually lose money this way.

You shoot for Charity X, bill them $3000.
They pay you $3000.

As far as the Federal Govt. is concerned, you owe 15.3% of that as the self-employment tax (Social Security, Medicare, etc.) plus your regular tax rate.

When you donate the $3000 back to Charity X, you can deduct it from your taxable income for income tax purposes but not self-employment tax purposes.

You end up with a loss of approximately $459.

If you want more solid numbers, I can come up with a more detailed hypothetical situation.

[egordon99]

Yep, forgot about the self-employment taxes, so yeah, you'd lose money.

My "day job" is salaried (W2), but all my photography income is filed under my personal return's Schedule-C.

Do folks REALLY think they can get away with the "Pay me my regular rate and I'll donate it right back to you" trick?

[sapearl]

Very interesting - carbon copy situation; you and I must have the same bosses :lol:

......My "day job" is salaried (W2), but all my photography income is filed under my personal return's Schedule-C. ...

[tracknut]

Hopefully he advised you against deducting your hourly rate. Claiming it would certainly raise a flag of interest, although I agree with your sentiments.

Really? Imagine the tax burden for our government (you and me) as folks all over the country suddenly decide to incorporate donating their services to a non-profit or charitable organization so they can take advantage of the write-offs to reduce their tax burden. And then imagine sitting down at tax time to send your money in to the IRS, and wondering why you're giving money for my write-offs, as I donated 1000 hours to the Church of Sports and Beer this year.

No, I prefer donations to actually be donations, myself.

Dave

[Celtic Tiger]

As I'm seeing it, you actually lose money this way.

You shoot for Charity X, bill them $3000.
They pay you $3000.

As far as the Federal Govt. is concerned, you owe 15.3% of that as the self-employment tax (Social Security, Medicare, etc.) plus your regular tax rate.

When you donate the $3000 back to Charity X, you can deduct it from your taxable income for income tax purposes but not self-employment tax purposes.

You end up with a loss of approximately $459.

If you want more solid numbers, I can come up with a more detailed hypothetical situation.

No, you're right on the money. This is a losing proposition.

[books64]

Good advice, Sapearl. You are right on the money.

[sapearl]

Thank you books64 :D. As much as I like the next good deduction on my Schedule-C, this one seemed a teeeeeeeny bit shakey. Glad there are smarter people than me here regarding the tax code ;).

Good advice, Sapearl. You are right on the money.

[Willie]

The underlying rule is that you can deduct your time as long as you are a member of Obama's staff (or once considered). :)

[sfaust]

Doesn't matter who is asking, it's illegal, UNLESS you also add the payment in to your income for the year (which nets you ZERO in the end)

People always suggest this as a way to get around the IRS's rules on deducting time, and I always hope someone points out that it's wrong. But hey, if you want to get audited ;)

It's not illegal to collect payment for your services, and then donate those funds back to the original charity. It is illegal not to claim it as income, but that goes for 'any' income you earn from anybody, not just in a situation like this. And yes, taxes would need to be paid and should be deducted from the income. It makes no sense to end up paying taxes on your 'donation' :( As long as you follow normal accounting rules and laws, there is nothing illegal in doing this, and its done all the time.

I still prefer to do this when I can over just showing up and giving away my time and services. It tends to weed out those just looking for free photography because then can get it by pleading charity. They would actually have to accept an invoice and cut a check, and that seems to weed out most who have called me. Those that follow through are generally in need of photography, and value a photographers time. Those are the clients, for profit or not, that I prefer to work with.

Also, it helps set a value on the work we do. If a photographer does it for nothing, the value set is, well, $0. But if the photographer submitted an invoice, was paid, then the value of the work is firmly embedded in the clients mind even if most of it comes back as a donation. Its not as easy as just showing up and shooting for free, but I feel the advantage is worth it IMO.