Dentists often like to donate services, such as volunteer dental work within the community. So, what is tax deductible?
The IRS lists specific contributions that are not deductible. Specifically, the IRS states that the value of time or services is NOT deductible as a contribution. The only way to deduct the contribution would be to record the donated service as income and then deduct as a contribution, which provides you no benefit because you have to pick up the contribution as income. The main reason behind this rule is that cash donations are made with after-tax dollars, but a donation of time and services is not. So, you earn money, pay tax on it, and then make a cash donation with which you are entitled to receive a tax benefit because you paid tax on the money when you originally earned it. In the case of a donation of time and services, the time and services were never taxed in the first place, so you should not receive a tax benefit for them. If you use your office or staff as part of the charitable donations of services then those costs would be deductible as ordinary business expenses.
What then is deductible as a charitable donation? Any of the items used to perform the donated service are deductible, such as uniforms and supplies. Also, any travel, including meals and lodging, would be deductible as long as the donated service required travel. On that note, dentists can deduct 14 cents per charitable mile or any actual auto expenses associated with the volunteer activity – the dentist would use actual or mileage based on whichever he/she typically deducts for business purposes. Dentists can deduct contributions of money or property made to a qualified organization. Keep in mind that if you receive any kind of benefit from the donation, you cannot deduct the portion of the contributions that represents the value of the benefit you receive. For example, if you make a $2,000 donation to purchase a table at a charitable event, only the portion of the donation above the value of the dinner and any other benefits you receive would be deductible. Normally, you will receive a letter that states what portion is deductible or not-deductible, but always keep in mind the rules of deducting charitable donations.
If you have any questions about deductibility of charitable services you have provided, please feel free to contact me.
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