tax deduction of image rights?

[Daniel Geiger]

As an academic, I get regular request by non-profits/charitable organizations to use my images (e.g., National Aquarium (DC), UC-Press). My tax accountant has told me that for donation of art by the artist only the costs of the materials are tax deductible, with digital files this means essentially zero.

Can such donations also be construed as giving a license (then at market value), like donating a patent?

[Ralph Barker]

I'd trust the opinion of your tax accountant. He/she is more likely to be sitting next to you during the audit. ;)

[Ed Richards]

> Can such donations also be construed as giving a license (then at market value), like donating a patent?

It could, but you need to convince Congress to change the law first. The worst irony is that the person you donate to could redonate the art and get a fair market deduction.

[John Bowen]

> The worst irony is that the person you donate to could redonate the art and get a fair market deduction.

In order for the first person to take a deduction, the recipient would have to be a charitable organization. The last time I checked, charitable organizations didn't pay taxes and thus were not interested in "deductions".

[Joseph O'Neil]

Two things. First, while tax laws vary wildly all over the place, if you do not send a hard copy, then you have to show that the image you sent has already been sold or paid for already. For example, if you sold an image to a magazine, and you have proof that you made money from that sale, in from of payment from that magazine, then you *might* be able to deduct the value of that image. Remember - I say *might*.

second idea - I've been there a couple times(on a smaller scale) too myself. You know how you get around it? Even if you submit the image via internet and/or in digital format, always, always send a hard copy as well, and then deduct the cost of the hard copy you sent. Keep postal receipts and / or fedex receipts to show you sent them a hard copy.

Last idea, if all else fails, tell them you would be happy to donate free rights, in exchange for a year long membership at the museum, etc.
:)

joe

[Brian Ellis]

Lots of bad information above. For federal income tax purposes an artist can deduct only the cost of the materials used as your tax accountant told you (some states have a different rule so if you live in a state with an income tax you might check on your state tax law). Sellling or paying for the image beforehand has nothing to do with it. While prior sales of the same or similar product are relevant when you're determining fair market value, fair market value is irrelevant when an artist donates a work of art that he or she created. It's only the cost of the materials that's deductible. Sending a hard copy likewise makes no difference except that you might be able to deduct a little more cost (e.g. the cost of the sheet of paper on which the photograph was printed, a pro-rata part of the chemicals used, all in all it might produce a $2 deduction). And lastly, if you donate something and get something of value in exchange (e.g. a year's membership in the museum) you've made a taxable exchange and are taxed on the difference between your cost of the item in question (basically zero) and the value of the membership. Which is o.k. if you would have joined the museum anyhow since it's better to pay a tax on the value as opposed to paying the membership fee itself but if you wouldn't otherwise have joined it's not such a good deal.

[Kirk Gittings]

Gotta agree with Brian. I am very conservative about this stuff these days. A few years back I had an audit that lasted 3 years. It made my life miserable. I don't think I got a good nights sleep unless I was passed out that entire time. If I had known what was going to happen I would have just written them a check at the start and saved me the mental anguish. All of my bulls___ efforts to stretch the rules ended up costing me a bundle. I appealed it and it ended up even higher.

Don't mess with them unless you enjoy aggravation.

[claudiocambon]

I agree with Brian and Kirk; however, if you are donating usage of an image to organizations instead of a print, then you may have more claim to say that you are donating services that are more than at cost. I shot a wedding for a foundation last year for expenses, and was told that I could deduct my fee as a donated service. I'm not ultimately sure on image rights, though.

[Brian Ellis]

I agree with Brian and Kirk; however, if you are donating usage of an image to organizations instead of a print, then you may have more claim to say that you are donating services that are more than at cost. I shot a wedding for a foundation last year for expenses, and was told that I could deduct my fee as a donated service. I'm not ultimately sure on image rights, though.


Unfortunately what you were told is wrong. The value of services rendered is never deductible for any tax purpose. Of course they could have paid your fee and then you could have donated the money back to them. But there's no reason to do that since the income and deduction would offset each other and you'd just be in the same place from a tax standpoint as you would have been in if you had done nothing.

[John Bowen]

..... and you'd just be in the same place from a tax standpoint as you would have been in if you had done nothing.

Actually you would be worse off by collecting your fee and donating your fee back to the foundation. You would still owe FICA and Medicare taxes = to approx 15.6% of your fee. :(