No Deduction for Donated Services

Question:

The owner of a local hotel donates a gift certificate to a 501(c)(3) organization for a one-night stay, which it then sells at a fundraising auction. The room is valued at $200, and the auction patron pays $100 for the gift certificate. Is the hotel owner entitled to a charitable contribution deduction; if so, for what amount?

Answer:

The IRS is clear on this question; according to Publication 526, "You cannot deduct the value of your time or services." Therefore, the hotel owner cannot claim a deduction for the value of his donated services. He does receive two tax benefits, however: he is not required to recognize income which he did not receive for the room, and he can still deduct the utilities and cleaning costs as business expenses.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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