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tax aspects of donations

updated tue 26 may 98


Jeremy M. Hellman on mon 25 may 98


You may choose to donate your ceramic piece to charity because the
charity will sell or auction your work and THEY end up with more money
than you have contributed. You get a small tax deduction (by not
including that pot in your ending inventory) but the tax exempt
organization gets (hopefully) a lot more money than that. (They're
tax-exempt and therefore don't pay tax on that additional money.)

Remember that if you write a check to the charity, you are using
"after-tax dollars" on which you have already paid tax. If you itemize
deductions you are getting a deduction for your donation of money, on
which you are already paid tax.

You may also choose to donate your work to charity because you believe
that you will get good publicity and hopefully more business from the

Many of us donate our time to certain charities because we believe in
their charitable purposes, and a host of other
societal/cultural/psychological reasons and we do this knowing that we
receive no tax benefit from the donation. The charity, if they keep their
records properly, should be tracking the value of donated time. Many
foundations and funds require that they have a certain amount of support
from the community. I am not an expert in this area, but that's what I
have been told. There are probably other reasons to record donated

As for itemizing deductions, most people will end up itemizing if their
total allowable itemized deductions exceed the standard deduction. (For
1997 this was $4150 for a single filer, $6050 for head of household and
$6900 for married filing jointly.) The standard deduction is higher for
people over 65 and/or blind people.

I believe there is really no free lunch. In almost every situation except
for a donation of your own art work, you are donated money on which you
have paid tax or taxes.

Warning: next paragraph discusses taxation of corporations and why most
ceramic artists do not incorporate.

The idea of incorporating sounds good in theory until you consider that:
1) it costs money to incorporate (state filing fees and direct costs and
possibly paying an attorney to help you incorporate), 2) record keeping
requirements are far greater for a corporation than for a self-employed
individual, 3) the tax return is considerably more complicated for a
corporation, 4) employment taxes for employees (and you would have to be
an employee of your own corporation) are MUCH higher than for a
self-employed person, 5) in most states, if you don't have expenses
exactly equal to income and you have net income at the end of the tax
year, you pay corporate net income tax on the net earnings of the
corporation and then you probably pay tax again when you take the money
out of the corporation as dividends or salary, 6) in some states there
are additional taxes on corporations based on the assets of the
corporation, regardless of earnings. In PA, all corporations and limited
liability companies pay a minimum of $300 each year just for residing in

Now if I have you wondering why anyone in their right minds would
incorporate, there are certain advantages to being a corporation in the
right situation. However a VERY WRONG reason to incorporate is to receive
a deduction for a donation.


Bonnie D. Hellman, CPA
in Pittsburgh, PA

>The way I understand this from all the stuff I've read here on the list,
>and in another previous thread on the same subject, bottom line, is that
>you really can't benefit from declaring donated personal work. Donations of
>your own art are Donations. If you give enough (over 30% of your income)
>to make it profitable to itemize your giving, you're better off writing a
>check to that charity.
>Anybody out there who can set me straight, I certainly will appreciate it.
>Meanwhile, I give if I want to, and I don't worry about how I'm going to
>Cindy Strnad
>Earthen Vessels
>Custer, SD

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