Showgirl Accounting, Part 1: Donating Performances & Tax Deductions

Hi darlings,

Donating performances is an AWESOME way to be involved in your community, get more exposure to new audiences, and get more stage time.  However, the value of your performance is not tax-deductible - even if you're donating it to a Non-Profit Organization.

REPEAT: donated performances (aka "services") are *NOT* tax-deductible.

If someone offers you a performance opportunity, and one of the "benefits" is that you can deduct the value of your guarantee, they are WRONG.  They should be directed to this helpful information from the IRS Brochure #526:

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Contributions

You Cannot Deduct

There are some contributions you cannot deduct. There are others you can deduct only part of.

You cannot deduct as a charitable contribution:

1. A contribution to a specific individual,

2. A contribution to a nonqualified organization,

3. The part of a contribution from which you receive or expect to receive a benefit,

4. The value of your time or services,

5. Your personal expenses

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According to my savvy tax accountant, it's often best to just think of the performance as a straight up donation.  The other option is to receive payment, then donate it back to the organization.  Unfortunately, the payment *is* income, and you're taxed on it anyway.

"To start, payments to performers, whether made by a for-profit or a non-profit company, are all considered taxable income to the recipient (both for income and self-employment taxes).  If the performer receives the payment, they have to claim that payment as income on their tax return.  If they turn right around and donate it back to the non-profit, that would be considered a charitable donation and could be claimed as a deduction if the performer itemizes their deductions on Schedule A of their return.

If the performer waives payment, meaning they never receive any payment from the non-profit, then there is no income to claim on their return because they did not receive any money.   However, because they did not receive any income, they do not get to take a deduction on their tax return for the waived payment because a deduction can be taken only when money was actually paid out, and in this case no money came in and no money went out. 

So if a performer wants to donate their performance, the best way to do that is to waive their payment rather than getting paid and donating it back so that they avoid paying income and self-employment taxes on income that they then turn around and return to the non-profit.   If they waive their payment, they have donated their time to the non-profit, which is a nice thing but, just like other service donations (i.e. volunteering at a soup kitchen or helping with a charity auction), is not deductible."


I had to read it twice.  Once out loud, just to be clear.  -sigh-  The good news is, if you're looking for a deduction on your taxes *somewhere* that will help to compensate for the expenses related to your donated performance, you're in luck - as long as you itemize.  Make sure that they write you a letter stating what you have donated and what (if anything) they provided to you in exchange.  That will allow you to deduct your expenses related to the event.:

Again quoting from the IRS Brochure:

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Out-of-Pocket Expenses in Giving Services

Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be:

• Unreimbursed,

• Directly connected with the services,

• Expenses you had only because of the services you gave, and

• Not personal, living, or family expenses.

Uniforms - You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization.
(Indigo's note - if you've already deducted the costs of the purchase/cleaning of this costume elsewhere, you can't deduct it again here)

 Travel - Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. This applies whether you pay the expenses directly or indirectly. You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses.
(Indigo's note - that includes bus fares, taxi, and subway - save your receipts!  Write the date & purpose on the ticket or in a log book!)

Car expenses.   You can deduct unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance.

If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. You can deduct parking fees and tolls, whether you use your actual expenses or the standard mileage rate.You must keep reliable written records of your car expenses.

(Indigo's note - I keep a notebook in my car and write down the start/end mileage and what I'm doing.  Keep your parking receipts!)

Deductible travel expenses. These include:

• Air, rail, and bus transportation,

• Out-of-pocket expenses for your car,

• Taxi fares or other costs of transportation between the airport or station and your hotel,

• Lodging costs, and

• The cost of meals. Because these travel expenses are not business-related, they are not subject to the same limits as business related expenses. For information on business travel expenses, see Travel in Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Out-of-Pocket Expenses

If you render services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following three rules apply.

1. You must have adequate records to prove the amount of the expenses.

2. You must get an acknowledgment from the qualified organization that contains:

a. A description of the services you provided,

b. A statement of whether or not the organization provided you any goods or services to reimburse you for the ex- penses you incurred,

c. A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and

3. You must get the acknowledgment on or before the earlier of:

a. The date you file your return for the year you make the contribution, or

b. The due date, including extensions, for filing the return.

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Donating is fun, good for you and good for your community.  But having a balance is also important.  Make sure you're taking care of your financial needs, and taking advantages of the tax deductions offered to you.


Happy Performing!


Love & Tassels,
Indigo