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I created a template for an 8-page monthly print publication and created the publication for print each month for 7 happy years. The client hired a new PR person who suddenly let me go and demanded my source files. I'm wondering if I can make it a tax-deductible donation to them since they are a non-profit and what amount I could claim for this on my taxes? I estimate that I spent about 10 hours creating the template and averaged 6-10 hours per month putting together the publication.

  • Interesting question. I would think (and I'm not an accountant or tax attorney) that if you both agree on the donated value, that's sufficient. – Scott Mar 18 '14 at 0:05
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    I know that you cannot donate "the value of services" to a non-profit, because I've tried that. – Lauren Ipsum Mar 18 '14 at 9:34
  • I guess this question is US-specific. In the UK, value of services has to be accounted for as a benefit in kind (and presumably as a gift in kind by the donor). – Andrew Leach Mar 26 '14 at 22:53
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change accordingly to search. Donations on taxes site - look at the links at the bottom of the page

"Non-Cash Contributions of Property

Contributions of property (other than cash) are subject to strict record keeping and substantiation rules. You must be able to substantiate the fair market value of the goods or property you donated, plus keep any written acknowledgments you receive from the charity. Fair Market Value of Contributed Property You must make an assessment of the fair market value of the property you contribute.

Non-Cash Contributions Totalling More Than $500 You must attach IRS Form 8283 if your total non-cash contributions exceeds $500.

Car Contributions: Must Have Written Acknowledgement If you contribute a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must received a written acknowledgement from the non-profit before you can claim a tax deduction.

Non-Cash Contributions over $5,000: Must Have Written Appraisal If you contribute property worth more than $5,000, you must obtain a written appraisal of the property's fair market value.

Limits on the Charitable Contribution Deduction

Your charitable contribution tax deduction may be limited. There are limits specific to charitable contributions, and there are general limits on itemized deductions. 50%, 30%, and 20% Limits on Charitable Contributions Generally, you can deduct cash contributions in full up to 50% of your adjusted gross income. Generally, you can deduct property contributions in full up to 30% of your adjusted gross income. Generally, you can deduct contributions of appreciated capital gains assets in full up to 20% of your adjusted gross income. Charitable contributions in excess of these limits can be carried over to the following tax year. The excess contributions can be carried over for a maximum of five years.

Not Tax Deductible

Contributions are not tax deductible if given to any of the following: Political parties, political campaigns, or political action committees. Contributions given to individual people. Fees or dues paid to professional associations. Contributions to labor unions, chambers of commerce, or business associations. Contributions to for-profit schools and hospitals. Contributions to foreign governments. Fines or penalties paid to local or state governments. The value of your time for services rendered to a non-profit.

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You'd have to check with a tax attorney or accountant on this. Time (in the US, anyway) isn't allowable as a donation. A physical object (say, a CD containing the files) may well be.

If your original contract does not state explicitly that you design was "work for hire," or makes no provision for transfer of copyright, then you own the copyright for your template design and they cannot use it without your permission. I don't know why you couldn't sell that copyright to them along with the files, and then donate the money back to them as a separate donation. Again, you would want to check this with your accountant, but I can't see why it would not be a valid deduction.

  • Good point about — "I don't know why you couldn't sell that copyright to them along with the files, and then donate the money back to them as a separate donation." I have designed the annual Christmas card to a local non-profit and charged them full value, then I turn around and donate the value back to them. I think the donation had to come from my personal account (not business) so I could claim the deduction. – ispaany Nov 8 '16 at 16:23
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I'm curious about this as well. You cannot charge for your time, but from everything I've read, you should be able to write off the fair market value of the product you've provided. Now, from what I understand (and I'm not an accountant), you would just need to prove the value of the publication. This would probably involve a conversation with the client with regards to how the publication enables them to acquire funding or provide their own products and/or services.

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This website seems to describe a very precise answer. I had an accountant fact check it.

http://www.endowdevelop.com/etech_pal/Content/other_gifts/charitable_gifts_of_intellectual_property.htm

Fact checked by http://kjbowie.com/

Summary: Intellectual property--patents, copyrights, trademarks, trade secrets, artworks, musical compositions, and other similar or related property rights--are an increasingly popular form of charitable giving. Such gifts can offer attractive tax-planning advantages for philanthropic-minded individuals. However, income, gift and estate tax considerations make careful planning essential prior to making such gifts.

At the outset of this discussion, it may be helpful to recall a bedrock principle of federal income taxation -- the "fruit and tree" doctrine. Under this doctrine, the fruit (income) must be taxed to the tree (taxpayer) which bore it. Although there are some exceptions, the law generally does not approve the assignment of income without an assignment of the property that produces the income.

Tax considerations with respect to gifts of intellectual property can be complex and potentially confusing. For example, if a patent is used in a trade or business, it can normally be depreciated (often as IRC Section 197 property). Deductions for charitable contributions may be reduced by such depreciation deductions that have been taken with respect to the donated property.

To assure that the full tax benefits of charitable gifts of intellectual property are obtained, donors should work closely with representatives of the charity involved, and with their own tax advisors.

  • Hi Jacob! Could you please post the gist of the article here? That way, your answer will still have value in case the link breaks at a later time. Link rot is rampant, and that's why we kind of dislike answers dependent on a link. Thanks! – Vincent Nov 9 '16 at 12:15

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