Tax deduction for donated books

November 13th, 2015 → 9:15 am @ // No Comments

Tax question for you, Carol! I file a Schedule C Business Income for my sole proprietorship. I know that donated books can’t be deducted there, but should be on the Schedule A (Itemized Deductions). My question is… Do I take the retail value of the book as the deduction or just the cost of the goods sold?

Tara

Tara,

IRS Publication 526 Charitable Contributions states,

Inventory

 If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it or its basis. The basis of contributed inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. You must remove the amount of your charitable contribution deduction from your opening inventory. It is not part of the cost of goods sold.

If the cost of donated inventory is not included in your opening inventory, the inventory’s basis is zero and you cannot claim a charitable contribution deduction. Treat the inventory’s cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.

That means, essentially, that you can deduct the cost of the book, (its basis or what it cost to get it printed and shipped to you), since it is the smaller of fair market vale (the retail price) or the basis.

Make sure you get a receipt for your donation.

Carol Topp, CPA


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