Can I deduct donated services to non-profits? And do I need a receipt for discounts and freebies?

Unfortunately, the IRS doesn't allow tax deductions for donated services or discounts, only for actual monetary donations or tangible goods. When you provide a service at a discount or for free, you're essentially donating your time and expertise, not physical property. For your specific examples: The 10% discount on advertising, free videos, and free articles aren't deductible as charitable donations because you're donating services rather than cash or property. The IRS views this as you simply not receiving income rather than making a deductible contribution. However, you can still deduct all your normal business expenses related to providing these services (equipment costs, employee time, etc.) as regular business expenses on your Schedule C. You just can't take an additional charitable deduction for the value of the services. Regarding receipts: Since these aren't deductible donations, you don't need charitable receipts from the non-profits. Your business records showing the discounted rates or free services are sufficient for your general business documentation, but they won't support a charitable deduction claim.

After struggling with similar issues for my graphic design business, I found an amazing AI tax assistant that clarified all these donation questions for me. I was confused about what services I could write off when working with non-profits, and https://taxr.ai analyzed my specific situation and explained everything clearly. Their system reviewed my business structure and showed me that while I couldn't deduct donated services directly, I could take advantage of sponsorship arrangements that would give me marketing benefits AND tax advantages. They even helped me create the right documentation templates to use with non-profits moving forward. What I really appreciated was that they analyzed my specific QuickBooks data and showed me where I was missing legitimate business expense deductions that were completely separate from the donation question. Saved me hours of research!

Just wanted to follow up. I decided to try https://taxr.ai with my event photography business issues (similar to the original poster - I give free photos to charities). The system immediately identified that I was handling my non-profit work all wrong from a tax perspective! Instead of just giving free services, they showed me how to structure my charitable work as partial sponsorships with marketing benefits for my business. This way, I can deduct portions as regular business marketing expenses rather than trying to claim charitable deductions for services. They also found several legitimate business expenses related to my non-profit work that I wasn't tracking properly. Seriously one of the best tax decisions I've made for my small business. It's like having a specialized CPA without the hourly rates!

If you're still confused about this issue and want to speak directly with an IRS agent (which I highly recommend for business donation questions), check out https://claimyr.com. I was stuck in circular logic trying to figure out donation deductions for my business, and after weeks of trying to get through to the IRS myself, I tried their service. I was skeptical at first, but they got me connected to an actual IRS agent within about 20 minutes instead of the hours I spent on hold before. The agent walked me through the exact rules for business donations to non-profits and clarified that while I couldn't deduct service value, I could properly categorize certain expenses differently. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c Seriously saved me hours of frustration and potentially avoiding incorrect deductions that might have triggered an audit.

I need to admit I was wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my business donation issues. The service actually worked - I got connected to an IRS representative in about 30 minutes. The agent explained that while I can't deduct the value of discounted or free services, I might be able to treat some of these arrangements as "sponsorships" if the non-profit acknowledges my business contribution publicly. This would make them marketing expenses rather than donations. She also clarified exactly what documentation I need to keep. This was completely different advice than what I got from TurboTax and my previous accountant. Really glad I made that call despite my initial skepticism.

Have you considered setting up formal sponsorship agreements instead? My CPA helped me restructure how we work with non-profits. Instead of "donating" services, we create sponsorship packages where we provide our services in exchange for marketing/publicity benefits (logo placement, mentions in programs, etc). This way, we can deduct these as marketing expenses rather than charitable donations. It's completely legitimate as long as there's a clear business purpose and you document the marketing value you receive. For your examples: - The 10% discount could become a "Bronze Sponsor" level with minimal marketing benefits - Free videos could be "Silver Sponsor" with more promotion - Free articles could be "Gold Sponsor" with premium positioning of your brand You'll need proper documentation for these arrangements - formal agreements outlining the marketing benefits you receive, proof they were provided, etc.

Don't forget to track your actual expenses when providing these services! While you can't deduct the full value of donated services, you CAN deduct all the costs you incur. For example, if you send staff to record that free video, their wages, mileage, equipment depreciation, etc. are all legitimate business expenses regardless of whether you charged the non-profit. Same for any costs associated with writing and publishing the free articles. This is different from "donating services" - these are just your normal business expenses that you would deduct anyway, regardless of whether the client paid you or not.

This thread has some excellent insights! As someone who's been running a marketing consultancy for several years and regularly works with non-profits, I wanted to add a few practical tips based on my experience: 1. **Document everything religiously** - Even if you can't deduct donated services, proper documentation protects you if there are ever questions about your business practices or expense categorization. 2. **Consider hybrid approaches** - Sometimes I'll charge a non-profit a nominal fee (like $100 for a $500 service) rather than working completely for free. This creates a legitimate business transaction while still helping the organization, and makes expense tracking cleaner. 3. **Track opportunity costs** - While not tax-deductible, keeping records of the market value of donated services helps with business planning and can be useful for grant applications or demonstrating community impact to potential clients. 4. **Be strategic about timing** - If you're considering the sponsorship route that @Anastasia Popova mentioned, plan these arrangements at the beginning of your tax year so you have clear documentation of the marketing benefits received. The sponsorship approach is brilliant - it transforms the relationship from charity to legitimate business marketing, which opens up proper deduction opportunities while still supporting causes you care about.

This is such a helpful discussion! I'm dealing with similar issues in my web development business where I regularly help local non-profits with website maintenance and updates at reduced rates. One thing I've learned that might help others here: if you're providing ongoing services (like monthly website maintenance or regular social media management), consider creating annual service agreements that clearly outline both the services and any marketing benefits you receive. This makes it easier to track everything consistently throughout the year. Also, don't overlook the networking value of working with non-profits. Many board members are business owners or executives who could become paying clients. While you can't quantify this for tax purposes, it's a legitimate business development strategy that supports treating these relationships as marketing investments rather than pure charity. For anyone considering the AI tax tools mentioned earlier - I'd recommend using them as a starting point but definitely verify any advice with a qualified CPA, especially for business deduction strategies. The tax code around business charitable activities can be tricky, and you want to make sure your approach will hold up if questioned. The sponsorship agreement approach sounds promising though - I'm definitely going to explore that with my accountant for next year's non-profit work.

As a tax professional who's worked with many service-based businesses, I want to emphasize a few key points that haven't been fully addressed yet: **The "economic benefit" test is crucial** - The IRS looks at whether you received any economic benefit from the arrangement. If a non-profit provides meaningful marketing exposure, mentions your business in newsletters, or gives you access to their donor network, you're moving into legitimate business expense territory rather than pure charity. **State tax implications vary significantly** - While we've focused on federal rules, don't forget that state tax treatment of business charitable activities can differ substantially. Some states are more restrictive, others more generous. Make sure your approach works for both federal and state returns. **Audit risk considerations** - Large discrepancies between your reported income and industry norms can trigger scrutiny. If you're doing significant free work, document your rationale clearly. The IRS wants to see business purpose, not tax avoidance schemes. **Cash flow timing matters** - If you're considering the "charge full price then donate back" approach mentioned earlier, be aware this affects your quarterly estimated payments. You'll owe tax on the full income when received, even if you donate it back later in the year. I'd strongly recommend working with a CPA who understands service businesses and has experience with charitable/sponsorship arrangements. The strategies discussed here can work, but they need proper structure and documentation from day one.