united-states tax-law
So you can&#39;t file a discount to a charity as a tax-deductible donation. But can you charge the charity your full rate, donate money, and claim that?
<p>If I offer a discount to a charity for services rendered, I can't claim the discount as a donation for tax purposes, right?</p>
<p>But, can I charge them my full rate, and then donate the money I didn't want back to them? So, if my normal rate is $100/hr, but I wanted to offer the charity a 25% off discount, can I instead charge the charity $100/hr and then write them a check for $25/hr, and claim that check as a tax-deductible donation?</p>

<h2>Doesn't help, does hurt.</h2>
<p>Say you charge a discounted rate of $75.  That adds $75 to your taxable income.</p>
<p>Say you charge a full rate of $100 and take a $25 charity tax deduction.  That nets out to adding $75 to your taxable income, <em>same outcome</em>, <strong>except the $25 is in peril, due to the complexities of the tax law.</strong>   For instance:</p>
<ul>
<li><p>Charity deductions give no tax benefit at all until you achieve $12,000 of itemized deductions (from donations and mortgage interest, certain state taxes, certain medical expenses etc.)  Deem that unfair <em>(we at charities certainly do!)</em> but the fact is, it's because you <em>already</em> get a $12,000 standard deduction as a 'gimme'.*</p>
</li>
<li><p>If you're a huge donor (I am <em>on certain years</em>, thanks DAF), you can only deduct 50% of income (with carryforwards, yay). Your donation-back reduces that.  Doing it direct adds $75 to AGI ($37.50 to deduction limit), so you can deduct donations of $37.50 <em>to other charities</em>.  The donation-back adds $100 to AGI (adding $50 to donation limit) <strong>except $25 of that is spoken for by the donation-back</strong>, leaving only $25 left.</p>
</li>
</ul>
<p>So I consider the maneuver to be a &quot;lose lose&quot; unless you have some bizarre tax reason for wanting to do that.</p>
<p>Further, such an arrangement is likely to draw scrutiny from the IRS.</p>
<h2>By the way, here's an origin concept.</h2>
<p>IRS waives taxes on value which you create by your own DIY labor*. Say you mow your own lawn at an annualized cost of $100/year (lawnmower depreciaton and fuel) instead of $1100/year to hire it done.  You created $1000 of value &quot;from the sweat of your brow&quot;. <strong>IRS's policy is not to treat that as income, and thus, not to tax that</strong>.</p>
<p>Thus, when you are a craftsman, IRS views <em>the sale of service</em> as the taxable event, not the crafting itself.</p>
<p>Similarly, when you do volunteer work for a charity, &quot;the sweat of your brow&quot; does not create a cash value of interest to the IRS <em>in either direction</em>.</p>
<p>Really, when you are a craftsman offering services, and you do services for a charity, that is considered volunteer labor.</p>
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<p>* This used to only be about $5000, but Trump was keen on a postcard-sized tax form, so they folded the adult &quot;personal exemption&quot; into the standard deduction, removing 2 lines on the 1040 form.  Meaning most Americans who itemized <em>before</em>, no longer itemized - they didn't have $12,000 of deductions!  Schedule A goes away for them (so mission accomplished there)... <em>but so does the tax deductibility of charitable contributions</em>, which was a knife in the heart of charities.</p>

<p>Sure you can, but it doesn't help.  The extra income from charging full price exactly offsets your deduction.</p>
<p>Let's say you work for 10 hours.  If you give them a 25% discount, you receive $750 of income (which is taxable to you), and you don't get any deduction for the discount.  So your taxable income went up $750.</p>
<p>On the other hand, if you charge them full price and donate back 25%, you receive $1000 in taxable income, and make a donation of $250 which you can deduct.  Again, the net effect on your taxable income is that it increased by $750.</p>
<p>So as far as taxes are concerned, there is no real difference between the two.  Your scheme doesn't confer any advantage.</p>
<p>What you <em>wish</em> you could do is give them a 25% discount on the services (so you receive income of $750), <em>and</em> deduct that $250 discount.  Then the net effect on your taxable income would be an increase of only $500, and so your taxes would be lower than in the other cases.  But this is precisely what the IRS won't let you do.</p>
