Deduct donation

What is the name of your state? NY

Hello,
I recently established myself as an independant contractor. One of my clients is a not-for-profit organization, and as part of the agreement, I am to provide an "in-kind" donation to them. For example: I charge $60 / hour. They said that they would pay me $80/hour, and i was to donate $20 / hour back to them. They said that I would be able to deduct this come tax time.

Now, I am a full time college student, living at home (So my parents still claim me as a dependant). How would I go about writing this donation off my taxes?

Thanks,
Larry

I don;t know but it sounds illegal on its face to me.

You can only deduct , if you itemize on your taxes, the actual out-of-pocket expense you would have. A service would not be out-of-pocket. It you donate materials, then the cost of the materials.

You realize an income of $60.00. That is the income.

Ginny J said:

You can only deduct , if you itemize on your taxes, the actual out-of-pocket expense you would have. A service would not be out-of-pocket. It you donate materials, then the cost of the materials.

You realize an income of $60.00. That is the income.

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And since you are a dependent on your parent's tax return, you are clearly unable to itemize.

Personally, I wouldn't go for it. You have to pay both regular tax and self employment taxes on that 20.00 that you would be donating back to them, and that going to cost you at least 25.00.

I disagree.(not with you Ldj. you posted while I was typing) If this were to work, OP must claim the entire $80/hour as income (after all, that is what he will be invoicing them for). If he then wants to claim $20/hour as a charitable donation he can do that and let it work out concerning taxation as it does.

Not only would this have to be worked in this manner, depending on the total income, the deduction itself may be limited to less than the total of that deduction. In effect, you would not be getting your $60/hour even after all is said and done because you would end up paying some taxes on the $20/hour and you are giving the entire $20/ hour back to them.

Thank you to all for the (prompt!!) advice. I will look into this further with the organization

I charge $60 / hour.

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I based my answer on this. What are you invoicing them?

Ginny J said:

I based my answer on this. What are you invoicing them?

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: I charge $60 / hour. They said that they would pay me $80/hour, and i was to donate $20 / hour back to them

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I presumed OP would invoice for the $80. How else could the payment of $80 per hour be justified?

justalayman said:

I presumed OP would invoice for the $80. How else could the payment of $80 per hour be justified?

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I agree...if they pay him 80.00 an hour they will give him a 1099 reflecting that.

scts102 said:

What is the name of your state? NY

Hello,
I recently established myself as an independant contractor. One of my clients is a not-for-profit organization, and as part of the agreement, I am to provide an "in-kind" donation to them. For example: I charge $60 / hour. They said that they would pay me $80/hour, and i was to donate $20 / hour back to them. They said that I would be able to deduct this come tax time.

Now, I am a full time college student, living at home (So my parents still claim me as a dependant). How would I go about writing this donation off my taxes?

Thanks,
Larry

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I think that arrangement is a mandatory kickback & is illegal. Point this out to them & tell them you'll just invoice them $60/hour & there will be no 'in-kind' donations. Also, be sure to keep copies of the written agreement and/or letter ffrom them saying that they plan to gross up your pay by $20/hour & make you kick it back. This will help you at IRS audit tiime.