IRS.gov: "Although you cannot deduct the value of your time or services, you can deduct the expenses you incur while donating your services to a qualified organization."
Now, this may seem clear, but it is not always so simple.
For example, if you paid an employee $500 specifically to make a website template for a charity, then gave the template to the charity for free, you incurred a tangible expense - the $500.00 paid to the employee. And that, might be tax deductible.
In most cases you cannot claim a deduction for the value of your own services or hourly costs (wages you paid to yourself.) Doing so could trigger an audit.
Pro Bono Expenses That May Be Deducted From Income Taxes
Before listing the types of expenses you may be able to deduct, they need to meet two IRS qualifications:
- The expense be incurred as a requirement in order to perform the service for the organization; and
The services must primarily benefit the charity and not the taxpayer (but both can benefit.)
Examples of expenses you may be able to deduct, or partially deduct, include: cost of supplies needed to provide or perform the service that directly benefited the charity; travel expenses; and other direct expenses.
To take any type of charitable deduction, including deductions for pro bono services, the burden is on you, the donor, to prove a donation was made. It is important to save all receipts and to get a receipt from the charity. If you cannot substantiate all expenses, the IRS can deny the deduction.
Pro Bono Expenses You May Not Deduct
Typically, you cannot deduct the cost of equipment purchases. For example, you could not deduct the purchase of a computer to set up a donor management system unless you also gave the computer to the charity. And, you could not deduct the cost of a postage machine to do a mass mailing more efficiently, but you could deduct the cost of postage.
IRS Red FlagsThe IRS will typically deny the deductions in which an individual or business substantially benefits more than a charity.
In most cases, in order to claim the percent deduction (charitable donations of any kind are not 100% deductible) you may need to claim income for the value of the job, even though you did not get paid.
Never try to deduct the cash value of your services for professional or service fees without talking to an accountant. In most cases, you will not be able to take any deduction for such fees.