Author Topic: Deductible? Online Courses given to charitable organizations  (Read 231 times)

Smokystache

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Deductible? Online Courses given to charitable organizations
« on: October 30, 2018, 12:45:30 PM »
It's never too early to start thinking about wacky tax deductions.

So let's say I am a mental health professional and I create an online course or program that helps people with PTSD. The online program is a series of videos and recommended activities to help people suffering from PTSD and I sell it on my website for $150. They watch the videos and (hopefully) complete the recommended activities/strategies and that's the "product". No in-person or skye-based therapy. No phone calls. Just an online program.

What if there was a non-profit organization - let's say a non-government organization that supports veterans suffered from post-combat psychological challenges. The organization is officially listed as a non-profit charity. And I gave them 10 "codes" that would allow them to provide my PTSD program to 10 veterans for free.

Part of me thinks that this is not a "professional service" (which is know is NOT tax deductible when provided to a charity); it's actually a product. I would argue that it is not a service because it doesn't take up my time  -- Certainly I have invested time in created the program, managing the online systems, and making sure everything is working, but I'm not spending X number of hours providing PTSD therapy for each participant. I see this as very different than trying to get a deduction when I've spent 10 hours at the organization volunteering my time as a mental health therapist and then trying to argue that my regular billable time should be considered deductible.

I see donating online courses as more analogous to donating 10 gift baskets for a charity dinner and being able to deduct the cost of the goods used to fill the charity basket.

Tell me all the ways I'm wrong about this ....

terran

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Re: Deductible? Online Courses given to charitable organizations
« Reply #1 on: October 31, 2018, 05:52:45 AM »
According to https://smallbusiness.chron.com/donate-work-product-tax-deduction-31140.html you can deduct the fair market value, or the cost basis, whichever is less. You'll need to do some research on what that means, but I'm guessing an online program wouldn't have any cost basis unless you're allowed to count your time creating it (which I suspect you can't). I could be wrong though.

It also says charitable contributions made by a pass through entity (so any business that's not taxed as a c-corp) is deducted on your personal returns, so this would only help if you itemize.

Cpa Cat

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Re: Deductible? Online Courses given to charitable organizations
« Reply #2 on: October 31, 2018, 06:57:42 AM »
Foregone revenue is not deductible. Another way to phrase this is that donations of property that would generate ordinary income (such as subscriptions to a course) are limited to basis.

You can deduct the cost of producing the items, but not the revenue that no one paid you.

As you've noted, the cost of your unpaid time is not included. Only real dollars spent.

You are correct in this statement:
Quote
I see donating online courses as more analogous to donating 10 gift baskets for a charity dinner and being able to deduct the cost of the goods used to fill the charity basket.

Note what you can't do with the gift baskets: Claim that the Fair Market Value is higher than your cost and then deduct that. You are limited to your actual cost.

Smokystache

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Re: Deductible? Online Courses given to charitable organizations
« Reply #3 on: October 31, 2018, 09:13:18 AM »
Aha! So for example, If I sold 990 courses in a year and gave away 10 courses, and I added up my direct costs to provide those courses (hosting, domain names, etc.) and that came to $1000. I could say that my direct costs to provide the courses that year would be $1 per course ($1000 of costs divided by a 1000 courses taken) - and so in this example I could deduct $1 per course that I gave to a charitable organization and was actually used??


MMbergmann

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Re: Deductible? Online Courses given to charitable organizations
« Reply #4 on: October 31, 2018, 09:53:36 AM »
You could sell them to people for them to donate to the PTSD org. Sure, it makes you seem profit-oriented, but maybe someone wants to help someone with PTSD and they want a deduction, which would be their basis ($150). Just a thought.

Smokystache

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Re: Deductible? Online Courses given to charitable organizations
« Reply #5 on: October 31, 2018, 12:32:44 PM »
You could sell them to people for them to donate to the PTSD org. Sure, it makes you seem profit-oriented, but maybe someone wants to help someone with PTSD and they want a deduction, which would be their basis ($150). Just a thought.

Good point - this would then be a regular sale for me (taxable income), but at least additional sales opportunities and a charitable contribution for them.